San Beda College of Law

182
MEMORY AID IN CIVIL LAW
CREDIT TRANSACTIONS
All transactions involving the purchase or loan of
goods, services, or money in the present with a
promise to pay or deliver in the future
Contracts of security
Types:
1. Secured transactions or contracts of real security
- supported by a collateral or an encumbrance of
property
2. Unsecured transactions or contracts of personal
security - supported only by a promise or personal
commitment of another such as a guarantor or
surety
Security
Something given, deposited, or serving as a means
to ensure fulfilment or enforcement of an
obligation or of protecting some interest in
property
Types of Security
a. personal when an individual becomes surety
or guarantor
b. real or property when a mortgage, pledge,
antichresis, 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
The delivery of property of one person to another
in trust for a specific purpose, with a contract,
epress or implied, that the trust shall be
faithfully eecuted and the property returned or
duly accounted for when the special purpose is
accomplished or !ept until the bailor claims it.
Parties:
1. bailor - the giver" one who delivers property
2. bailee- the recipient" one who receives the
custody or possession of the thing thus delivered
LOAN (Articles !"" # !$%

A contract wherein one of the parties delivers to
another, either something not consumable so that
the latter may use the same for a certain time and
return it or money or other consumable thing,
upon the condition that the same amount of the
same !ind and #uality shall be paid. $Art 1%&&'
C&aracteristics:
1. Real Contract delivery of the thing loaned is
necessary for the perfection of the contract
NOTE: An accepted promise to ma!e a future
loan is a consensual contract, and therefore
binding upon the parties but it is only after
delivery, will the real contract of loan arise.
$Art 1%&('
2. Unilateral Contract - once the sub)ect matter
has been delivered, it creates obligations on the
part of only one of the parties $i.e. borrower'.
'in(s:
1. Commodatum when the bailor $lender'
delivers to the bailee $borrower' a non-
consumable thing so that the latter may use it
for a certain time and return the identical
thing.
'in(s of commo(atum:
a. Ordinary 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 eists
in the following cases*
i. neither the duration nor purpose of the
contract is stipulated
ii. the use of the thing is merely tolerated
by the owner
2. Simple loan or mutuum where the lender
delivers to the borrower money or other
consumable thing upon the condition that the
latter shall pay the same amount of the same
!ind and #uality.
Commo(atum )utuum
'ey: COPS*LOTR
1. Object
+on-consumable ,onsumable
2. Cause
-ratuitous .ay or may not be
gratuitous
3. Purpose
/se or temporary
possession
,onsumption
4. Subject Matter
0eal or personal
property
1nly personal
property
5. Ownership of the thing
0etained by the
bailor
2asses to the debtor
6. Thing to be returne
3act thing loaned 3#ual amount of the
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
CREDIT TRANSACTIONS
San Beda College of Law
183
MEMORY AID IN CIVIL LAW
same !ind and
#uality
!. "ho bears ris# of $oss
4ailor 5ebtor
%. "hen to return
6n case of urgent
need, even before
the epiration of the
term
1nly after the
epiration of the
term
Loan Cre(it
5elivery by one party
and the receipt of
other party of a
given sum of money
or other consumable
thing upon an
agreement, epress
or implied, to repay
the same.
Ability of a person to
borrow money or
things by virtue of
the trust or
confidence reposed
by the lender that he
will pay what he
promised.
Loan Cre(it
1. 6nterest ta!en at
the epiration of the
credit
6nterest is ta!en in
advance
2. Always on a
double name paper
$two signatures
appear with both
parties held liable
for payment'
Always on a single
name paper $i.e.
promissory note with
no indorse-ment
other than the
ma!er'
CO))ODAT+) (Articles !", # !,-%
Nature:
1. P+RPOSE: 4ailee in commodatum ac#uires the
temporary use of the thing but not its fruits
$unless stipulated as an incidental part of the
contract'.$Art 1%&7'
/se must be temporary, otherwise the
contract may be a deposit.
2. CA+SE: 3ssentially gratuitous" it ceases to be a
commodatum if any compensation is to be paid by
the borrower who ac#uires the use, in such case
there arises a lease contract.
Similar to a donation in that it confers a
benefit to the recipient. The presumption is
that the bailor has loaned the thing for having
no need therefor.
&. S+B.ECT )ATTER: -enerally non-consumable
whether real or personal but if the consumable
goods are not for consumption as when they are
merely for ehibition, consumable goods may be
the sub)ect of the commodatum. $Art 1%&8'
(. 4ailor need not be the owner of the thing owned
$Art. 1%&9' since by the loan, ownership does not
pass to the borrower.
A mere lessee or usufructuary may lend but
the borrower or bailee himself may not lend
nor lease the thing loaned to him to a third
person $Art 1%&2:2;'
,/ Purely Personal (Art !"!%:
5eath of either party terminates the
contract unless by stipulation, the
commodatum is transmitted to the heirs of
either or both parties.
4ailee can neither lend nor lease the ob)ect
of the contract to a third person.
NOTE: /se of the thing loaned may etend to
members of the bailee<s household ecept*
a. contrary stipulation"
b. nature of the thing forbids such use
O0li1ations of t&e Bailee: (Arts !2 # !2,%
/ To pay for the ordinary epenses for the use and
preservation of the thing loaned. $Art 1%(1'
-/ To be liable for the loss of the thing even if it
should be through a fortuitous event in the
following cases* $'LAS D%
a. when he 3eeps it longer than the period
stipulated, or after the accomplishment of
its use
b. when he lends or leases it to third persons
who are not members of his household
c. when the thing loaned has been delivered
with appraisal of its value
d. when, being able to save either of the thing
borrowed or his own things, he chose to
save the latter" or
e. when the bailee (evoted the thing for any
purpose different from that for which it has
been loaned $Art 1%(2'
&. To be liable for the deterioration of thing loaned
$a' if epressly 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
(. To pay for etraordinary epenses arising from
the actual use of the thing by the bailee, which
shall be borne e#ually by both the bailor and
the bailee, even though the bailee acted
without fault, unless there is a stipulation to the
contrary $Art 1%(% par 2'
7. To return the thing loaned
The bailee has no right to retain the thing
loaned as security for claims he has against
the bailor even for etraordinary epenses
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
184
MEMORY AID IN CIVIL LAW
ecept for a claim for damages suffered
because of the flaws of the thing loaned.
NOTES*
=owever, the bailee<s right etends no
further than retention of the thing loaned
until he is reimbursed for the damages
suffered by him.
=e cannot lawfully sell the thing to satisfy
such damages without court<s approval.
6n case there are two or more bailees,
their obligation shall be solidary.
O0li1ations of t&e 0ailor (Art !2$ # Art !,-%:
1. To respect the duration of the loan
GENERAL RULE: Allow the bailee the use of the
thing loaned for the duration of the period
stipulated or until the accomplishment of the
purpose for which the commodatum was
instituted.
EXCEPTONS:
a! n case of ur"ent need in which case
bailor may demand its return or temporary
use"
#! The bailor may demand immediate
return of the thing if t$e #ailee commits any
act of in"ratitude specified in Art! %&'.
2. To refund to the bailee etraordinary epenses for
the preservation of the thing loaned, provided the
bailee brings the same to the !nowledge of the
bailor before incurring them, ecept when they
are so urgent that the reply to the notification
cannot be awaited without danger.
&. To be liable to the bailee for damages for !nown
hidden flaws.
Re4uisites:
a. There is flaw or defect in the thing loaned"
b. The flaw or defect is hidden"
c. The bailor is aware thereof"
d. =e does not advise the bailee of the same"
and
e. The bailee suffers damages by reason of said
flaw or defect
NOTES:
6f the above re#uisites concur, the bailee has
the right of retention for damages.
The bailor cannot eempt himself from the
payment of epenses or damages by
abandoning the thing to the bailee.
SI)PLE LOAN OR )+T++) (Art !," # !$%
A contract whereby one party delivers to
another, money or other consumable thing with
the understanding that the same amount of the
same !ind and #uality shall be paid. $Art. 1%7&'
NOTES:
The mere issuance of the chec!s does not result
in the perfection of the contract of loan. The
,ivil ,ode provides that the delivery of bills of
echange and mercantile documents, such as
chec!s, shall produce the effect of payment
only when they have been encashed $Gerales (s!
CA )*+ SCRA &,+'. 6t is only after the chec!s
have produced the effect of payment that the
contract of loan may be deemed perfected.
The obligation is >to pay? and not to return
because the consumption of the thing loaned is
the distinguishing character of the contract of
mutuum from that of commodatum.
+o estafa is committed by a person who refuses
to pay his debt or denies its eistence.
Simple Loan5)utuum Rent
1. 5elivery of money
or some consumable
thing with a promise
to pay an e#uivalent
of the same !ind and
#uality
5elivery of some non-
consumable 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
&. 0elationship
between the parties
is that of obligor-
obligee
0elationship is that
of a landlord and
tenant
(. ,reditor receives
payment for his loan
1wner of the
property rented
receives
compensation or
price either in
money, provisions,
chattels, or labor
from the occupant
thereof in return for
its use $Tolentino vs
-on@ales, 7A 2hil 779
1%2B'
Loan Sale
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
18
MEMORY AID IN CIVIL LAW
1. 0eal contract ,onsensual contract
2. -enerally
unilateral because only
borrower has
obligations
4ilateral and reciprocal
NOTE: 6f the property is >sold?, but the real intent is
only to give the ob)ect as security for a debt as when
the >price? is comparatively small there really is a
contract of loan with an >e#uitable mortgage.?
Commo(atum5
)utuum
Barter
1. Sub)ect matter is
money or fungible
things
Sub)ect matter is
non-fungible, $non
consumable' things
2. 6n commodatum,
the bailee is bound
to return the
identical thing
borrowed when the
time has epired or
purpose served
The thing with
e#uivalent value is
given in return for
what has been
received
&. .utuum may be
gratuitous and
commodatum is
always gratuitous
1nerous, actually a
mutual sale
6orm of Payment (Art !,,%:
1. 6f the thing loaned is money - payment must be
made in the currency stipulated, if it is possible"
otherwise it is payable in the currency which is
legal tender in the 2hilippines and in case of
etraordinary inflation or deflation, the basis of
payment shall be the value of the currency at the
time of the creation of the obligation
2. 6f what was loaned is a fun"i#le t$in" ot$er t$an
money - the borrower is under obligation to pay
the lender another thing of the same !ind, #uality
and #uantity. 6n case it is impossible to do so, the
borrower shall pay its value at the time of the
perfection of the loan.
Interest
The compensation allowed by law or fied by the
parties for the loan or forbearance of money,
goods or credits
0e#uisites for 5emandability* (ELI%
1. must be epressly stipulated
3ceptions*
a. indemnity for damages
b. interest accruing from unpaid interest
2. must be lawful
&. must be in writing
Compoun( Interest
GENERAL RULE: /npaid interest shall not earn
interest.
EXCEPTONS:
1. when )udicially demanded
2. when there is an epress stipulation $must
be in writing in view of Art. 1%78'
7ui(elines for t&e application of proper interest
rates
1. 6f there is stipulation* that rate shall be applied
2. The following are the rules of thumb for the
applicationCimposition of interest rates*
a' Dhen an obligation, regardless of its source,
i.e., law, contracts, #uasi-contracts, delicts
or #uasi-delicts is breached, the
contravenor can be held liable for damages.
b' Dith regard particularly to an award of
interest in the concept of actual and
compensatory damages, the rate of interest,
as well as the accrual thereof, is imposed,
as follows*
i. Dhen the obligation breached consists
of payment of a sum of money -loan or
for#earance of money., the interest
shall be that which is stipulated or
agreed upon by the parties. 6n absence
of an agreement, the rate shall be the
legal rate $i.e. 12E per annum'
computed from default.
NOTE: The interest due shall itself earn
legal interest from the time it is
)udicially demanded
ii. 6n other cases, the rate of interest shall
be si percent $8E' per annum.
NOTE: +o interest, however, shall be
ad)udged on unli#uidated claims or
damages ecept when or until the
demand can be established with
reasonable certainty. Dhen the demand
cannot be established, the interest shall
begin to run only from the date of the
)udgment of the court is made.
iii. Dhen the )udgment of the court
awarding a sum of money becomes final
and e/ecutory, the rate of legal
interest, whether the case falls under
paragraph i or ii above, shall be 12E per
annum from such finality until its
satisfaction, this interim period being
deemed to be by then an e#uivalent to
a forbearance of credit. $Eastern
S$ippin" Lines (s! CA0 1uly *)0 *223'
NOTES:
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
18!
MEMORY AID IN CIVIL LAW
Central 4an5 Circular No! 3*& fiing the rate of
interest at 12E per annum deals with loans,
forbearance of any money, goods or credits and
)udgments involving such loans, or forbearance in
the absence of epress agreement to such rate
6nterest as indemnity for damages is payable only
in case of default or non-performance of the
contract. As they are distinct claims, they may be
demanded separately. $Sentinel 6nsurance ,o., 6nc.
vs ,A, 192 S,0A 71B'
Central Ban3 Circular No/ !8, $5ec. 1A, 1%92'
removed the /sury Faw ceiling on interest rates
for secured and unsecured loans, regardless of
maturity.
9ali(ity of unconsciona0le interest rate in a loan
Supreme ,ourt in Sps! Solan"on (s! 1ose
Sala6ar0 G!R! No! *)'2330 1une )20 )77*, said that
since the usury law had been repealed by ,4 ,ir. +o.
%A7 there is no more maimum rate of interest and
the rate will )ust depend on the mutual agreement of
the parties $citing Lim La8 (s! Olympic Sa8mill Co!0
*)2 SCRA 3,2'. 4ut the Supreme ,ourt said that
nothing in said circular grants lenders carta #lanc$e
authority to raise interest rates to level which will
either enslave their borrowers or lead to a
hemorrhaging of their assets $citing Almeda (s! CA0
)'& SCRS )2)'. 6n 9edel (s! CA0 )22 SCRA 3+*, it was
ruled that while stipulated interest of 7.7E per month
on a loan is usurious pursuant to ,4 ,ircular +o. %A7,
the same must be e#uitably reduced for being
ini#uitous, unconscionable and eorbitant. 6t is
contrary to morals, $contra #onos mores'. 6t was
reduced to 12E per annum in consonant with )ustice
and fair play.
DEPOSIT (Articles !$- # -88!%
A contract constituted from the moment a person
receives a thing belonging to another, with the
obligation of safely !eeping it and of returning the
same.
C&aracteristics:
1. Real Contract - contract is perfected by the
delivery of the sub)ect matter.
2. Unilateral -"ratutitous deposit. - only the
depositary has an obligation.
&. 4ilateral -onerous deposit. - gives rise to
obligations on the part of both the depositary
and depositor.
Deposit )utuum
1. Purpose
2rincipal purpose is
safe!eeping or
custody
2rincipal purpose is
consumption
2. "hen to &eturn
5epositor can
demand the return of
the sub)ect matter at
will
The lender must wait
until the epiration
of the period granted
to the debtor
3. Subject Matter
Sub)ect matter may
be movable or
immovable property
Sub)ect matter is
only money or other
fungible thing
4. &e$ationship
0elationship is that
of depositor and
depositary.
0elationship is that of
lender $creditor' and
borrower $debtor'.
5. Co'pensation
+1 compensation of
things deposited with
each other $ecept
by mutual
agreement'.
There can be
compensation of
credits.
Deposit Commo(atum
1. 2urpose is
Safe!eeping
1. 2urpose is the
transfer of the use
2. .ay be gratuitous 2. 3ssentially and
always gratuitous
&. .ovableCcorporeal
things only in case of
etra)udicial deposit
&. 4oth movable and
immovable may be
the ob)ect
'in(s of Deposit:
1. Gudicial $Se#uestration' ta!es place when an
attachment or sei@ure of property in litigation is
ordered.
2. 3tra-)udicial
a. Holuntary one wherein the delivery is
made by the will of the depositor or by two
or more persons each of whom believes
himself entitled to the thing deposited.
$Arts 1%89 1%%7'
b. +ecessary one made in compliance with a
legal obligation, or on the occasion of any
calamity, or by travellers in hotels and inns
$Arts 1%%8 - 2AA(', or by travellers with
common carriers $Art 1B&( 1B&7'.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
18"
MEMORY AID IN CIVIL LAW
NOTE: The chief difference between a voluntary
deposit and a necessary deposit is that in the
former, the depositor has a complete freedom in
choosing the depositary, whereas in the latter,
there is lac! of free choice in the depositor.
.u(icial E:tra*;u(icial
1. Creation
Dill of the court Dill of the parties
or contract
2. Purpose
Security or to insure
the right of a party
to property or to
recover in case of
favorable )udgment
,ustody and
safe!eeping
3. Subject Matter
.ovables or
immovables,
but generally
immovables
.ovables only
4. Cause
Always onerous .ay be compen-
sated or not, but
generally gratuitous
5. "hen 'ust the thing be returne
/pon order of the
court or when
litigation is ended
/pon demand of
depositor
6. (n whose beha$f it is he$
2erson who has a
right
5epositor or third
person designated
GENERAL RULE: ,ontract of deposit is gratuitous
$Art 1%87'
EXCEPTONS:
1. when there is contrary stipulation
2. depositary is engaged in business of storing
goods
&. property saved from destruction without
!nowledge of the owner
NOTES:
Article 1%88 does not embrace incorporeal
property, such as rights and actions, for it follows
the person of the owner, wherever he goes.
A contract for the rent of safet) eposit bo*es is
not an ordinary contract of lease of things but a
special 5ind of deposit" hence, it is not to be
strictly governed by the provisions on deposit.
The relation between a ban! and its customer is
that of a bailor and bailee. $,A Agro vs ,A, 21%
S,0A (28'
O0li1ations of t&e Depositary (Art !<- #!!%:
1. To !eep the thing safely $Art 1%B2'
3ercise over the thing deposited the same
diligence as he would eercise over his
property
2. To return the thing $Art 1%B2'
Person to =&om t&e t&in1 must 0e
returne(:
a. 5epositor, to his heirs and successors, or the
person who may have been designated in
the contract
b. 6f the depositary is capacitated - he is
sub)ect to all the obligations of a depositary
whether or not the depositor is capacitated.
6f the depositor is incapacitated, the
depositary must return the property to the
legal representative of the incapacitated or
to the depositor himself if he should ac#uire
capacity $Art 1%BA'.
c. 6f the depositor is capacitated and the
depositary is incapacitated - the latter does
not incur the obligation of a depositary but
he is liable*
i..to return the thing deposited while still
in his possession"
ii.to pay the depositor the amount which
he may have benefited himself with the
thing or its price sub)ect to the right of
any third person who ac#uired the thing
in good faith $Art 1%B1'
Time of return:
a/ Upon demand even though a specified
period or time for such return may have
been fied ecept when the thing is
)udicially attached while in the depositary<s
possession or should he have been notified
of the opposition of a third person to the
return or the removal of the thing
deposited. $Art 1%%9'
b. f deposit "ratuitous, the depositary may
return the thing deposited notwithstanding
that a period has been fied for the deposit
if )ustifiable reasons eists for its return.
c. f t$e deposit is for a (alua#le
consideration, the depositary has no right to
return the thing deposited before the
epiration of the time designated even if he
should suffer inconvenience as a
conse#uence.$Art 1%9%'
>&at to return: product, accessories, and
accessions of the thing deposited $Art 1%9&'
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
188
MEMORY AID IN CIVIL LAW
&. +ot to deposit the thing with a third person unless
authori@ed by epress stipulation $Art 1%B&'
The depositor is liable for the loss of the thing
deposited under Article 1%B& if*
a. he transfers the
deposit with a third person 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 authori@ed even in the
absence of negligence" or
c. the thing is lost
through the negligence of his employees
whether the latter are manifestly careless or
not.
(. 6f the thing deposited should earn interest $Art
1%B7'*
a. to collect interest and the capital itself as it
fall due
b. to ta!e steps to preserve its value and rights
corresponding to it
7. +ot to commingle things deposited if so stipulated
$Art 1%B8'
8. +ot to ma!e use of the thing deposited unless
authori@ed $Art 1%BB'
GENERAL RULE: 5eposit is for safe!eeping of the
sub)ect matter and not for use. The unauthori@ed
use by the depositary would ma!e him liable for
damages.
EXCEPTONS:
1. Dhen the preservation of the thing deposited
re#uires its use
2. Dhen authori@ed by the depositor
NOTE: The permission to use is +1T presumed
ecept when such use is necessary for the
preservation of the thing deposited.
Effect if permission to use is 1i?en (Art !<@%:
1. 6f thing deposited is non-consumable,
the contract loses the character of a deposit
and ac#uires that of a commodatum despite
the fact that the parties may have
denominated it as a deposit, unless
safe!eeping is still the principal purpose.
2. 6f thing deposited consists of
moneyCconsumable things, the contract is
converted into a simple loan or mutuum unless
safe!eeping is still the principal purpose in
which case it is called an irregular deposit.
3ample* ban! deposits are irre"ular deposits
in nature but governed by law on loans.
B. Dhen the thing deposited is delivered sealed and
closed *
a. to return the thing deposited in the same
condition
b. to pay for damages should the seal or loc!
be bro!en through his fault, which is
presumed unless proved otherwise
c. to !eep the secret of the deposit when the
seal or loc! is bro!en with or without his
fault $Art 1%91'
NOTE: The depositary is authori@ed to open
the thing deposited which is closed and
sealed when $Art 1%92'*
i. there is presumed authority $i.e. when the
!ey has been delivered to him or the
instructions of the depositor cannot be
done without opening it'
ii. necessity
9. To change the way of the deposit if under the
circumstances, the depositary may reasonably
presume that the depositor would consent to
the change if he !new of the facts of the
situation, provided, that the former notifies the
depositor thereof and wait for his decision,
unless delay would cause danger
%. To pay interest on sums converted to personal
use if the deposit consists of money $Art 1%9&'
1A. To be liable for loss through fortuitous event
(S+DA%* $Art 1%B%'*
a. if stipulated
b. if he uses the thing without the depositorIs
permission
c. if he (elays its return
d. if he allows others to use it, even though he
himself may have been authori@ed to use
the same
NOTES:
Jied, savings, and current deposits of money in
ban!s and similar institutions shall be governed
by the provisions concerning simple loan! $Art
1%9A'
The general rule is that a ban! can compensate
or set off the deposit in its hands for the
payment of any indebtedness to it on the part of
the depositor. 6n true deposit, compensation is
not allowed.
Irre1ular (eposit )utuum
1. The consumable
thing deposited may
be demanded at will
by the depositor
1. Fender is bound
by the provisions of
the contract and
cannot demand
restitution until the
time for payment, as
provided in the
contract, has arisen
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
18#
MEMORY AID IN CIVIL LAW
2. The only benefit is
that which accrues
to the depositor
2. 3ssential cause for
the transaction is the
necessity of the
borrower
&. The irregular
depositor has a
preference over
other creditors with
respect to the thing
deposited
&. ,ommon creditors
en)oy no preference
in the distribution of
the debtor<s property
Rule =&en t&ere are t=o or more (epositors (Art
!@,%:
1. f t$in" deposited is di(isi#le and depositors are
not solidary* 3ach depositor can demand only his
proportionate share thereto.
2. f o#li"ation is solidary or if t$in" is not di(isi#le*
0ules on active solidarity shall apply, i.e. each one
of the solidary depositors may do whatever may
be useful to the others but not anything which
may be pre)udicial to the latter, $Art. 1212' and
the depositary may return the thing to anyone of
the solidary depositors unless a demand, )udicial
or etra)udicial, for its return has been made by
one of them in which case, delivery should be
made to him $Art. 121('.
&. Return to one of depositors stipulated. The
depositary is bound to return it only to the person
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 1%%('.
The depositor<s heir who in good faith may have
sold the thing which he did not !now 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 $Art 1%%1'.
O0li1ations of t&e Depositor (Art !!- # !!,%:
1. To pay epenses for preservation
a. f t$e deposit is "ratuitous, the depositor is
obliged to reimburse the depositary for
epenses incurred for the preservation of the
thing deposited $Art 1%%2'
b. f t$e deposit is for (alua#le consideration,
epenses for preservation are borne by the
depositary unless there is a contrary
stipulation
2. To pay loses incurred by the depositary due to
the character of the thing deposited
GENERAL RULE: The depositor shall reimburse the
depositary for any loss arising from the character of
the thing deposited.
EXCEPTONS:
1. at the time of the deposit, the depositor was
not a8are of the dangerous character of the
thing
2. when depositor was not e/pected to 5no8 the
dangerous character of the thing
3. when the depositor notified the depository of
the same
4. the depositary 8as a8are of it 8it$out ad(ice
from the depositor
E:tin1uis&ment of 9oluntary Deposit (Art !!,%
1. Foss or destruction of the thing deposited
2. 6n case of gratuitous deposit, upon the death of
either the depositor or the depositary
3. 1ther causes, such as return of the thing,
novation, merger, epiration of the term
fulfilment of the resolutory condition, etc $Art
12&1'
Necessary Deposits
1. .ade in compliance with a legal obligation
2. .ade on the occasion of any calamity such as
fire, storm, flood, pillage, shipwrec! or other
similar events $deposito misera#le'
3. .ade by travellers in hotels and inns or by
travellers with common carrier
Deposit 0y Tra?ellers in &otels an( inns:
The !eepers of hotels or inns shall be
responsible as depositaries for the deposit of
effects made by travellers pro(ided*
a. +otice was given to them or to their
employees of the effects brought by the
guest" and
b. The guests ta!e the precautions which said
hotel-!eepers or their substitutes advised
relative to the care and vigilance of their
effects.
NOTES:
Fiability etends to vehicles, animals and
articles which have been introduced or placed in
the annees of the hotel.
Fiability shall 3K,F/53 losses which proceed
from force ma)eure. The act of a thief or robber
is not deemed force ma)eure unless done with
the use of arms or irresistible force.
The hotel-!eeper cannot free himself from the
responsibility by posting notices to the effect
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#$
MEMORY AID IN CIVIL LAW
that he is not liable for the articles brought by the
guest. Any stipulation to such effect shall be void.
+otice is necessary only for suing civil liability but
not in criminal liability.
7+ARANTA (Articles -82< # -8@2%
A contract whereby a person $guarantor' binds
himself to the creditor to fulfil the obligation of
the principal debtor in case t$e latter fail to do
so.
Classification of 7uaranty:
*! 6n the 4road sense*
a. 2ersonal - the guaranty is the credit given by
the person who guarantees the fulfilment of
the principal obligation.
b. 0eal - the guaranty is the property, movable
or immovable.
)! As to its Ori"in
a. ,onventional - agreed upon by the parties.
b. Fegal - one imposed by virtue of a provision of
a law.
c. Gudicial - one which is re#uired by a court to
guarantee the eventual right of one of the
parties in a case.
,! As to Consideration
a. -ratuitous - the guarantor does not receive
any price or remuneration for acting as such.
b. 1nerous - the guarantor receives valuable
consideration.
3! As to the Person "uaranteed
a. Single - one constituted solely to guarantee or
secure performance by the debtor of the
principal obligation.
b. 5ouble or sub-guaranty - one constituted to
secure the fulfilment by the guarantor of a
prior guaranty.
'! As to Scope and E/tent
a. 5efinite - the guaranty is limited to the
principal obligation only, or to a specific
portion thereof.
b. 6ndefinite or simple - one which not only
includes the principal obligation but also all
its accessories including )udicial costs
S+RETASBIP
A contract whereby a person $surety' binds himself
solidarily with the principal debtor
A relation which eists where one person
$principal' has underta!en an obligation and
another person $surety' is also under a direct and
primary obligation or other duty to the obligee,
who is entitled to but one performance, and as
between the two who are bound, the second
rather than the first should perform $A"ro
Con"lomerates0 nc! (s! CA0 ,3+ SCRA 3'7'
NOTES:
The reference in Article 2A(B to solidary
obligations does not mean that suretyship is
withdrawn from the applicable provisions
governing guaranty. A surety is almost the same
as a solidary debtor, ecept that he himself is a
principal debtor.
6n suretyship, there is but one contract, and the
surety is bound by the same agreement which
binds the principal. A surety is usually bound
with the principal by the same instrument,
eecuted at the same time and upon the same
consideration $Palmares (s CA0 )++ SCRA 3))'
6t is not for the obligee to see to it that the
principal debtor pays the debt or fulfill the
contract, but for the surety to see to it that the
principal debtor pays or performs $Paramount
nsurance Corp (s CA0 ,*7 SCRA ,%%'
Nature of SuretyCs un(erta3in1:
1. Lia#ility is contractual and accessory #ut direct
NOTE: =e directly, primarily and e#ually binds
himself with the principal as original promisor,
although he possesses no direct or personal
interest over the latter<s obligation, nor does he
receive any benefits therefrom. $2+4 vs ,A, 1%9
S,0A B8B'
2. Lia#ility limited #y t$e terms of t$e contract!
NOTE: 6t cannot be etended by implication
beyond the terms of the contract $2+4 vs ,A,
1%9 S,0A B8B'
3. Lia#ility arises only if principal de#tor is $eld
lia#le!
NOTES:
The creditor may sue separately or together
the principal debtor and the surety. Dhere
there are several sureties, the obligee may
proceed against any one of them.
6n the absence of collusion, the surety is
bound by a )udgment against the principal
even though he was not a party to the
proceedings. The nature of its underta!ing
ma!es it privy to all proceedings against its
principal $:inman General Assurance Corp!
(s! Sali50 *++ SCRA %37'
4. Surety is not entitled to t$e #enefit of
e/$austion
NOTE: =e assumes a solidary liability for the
fulfilment of the principal obligation $To8ers
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#1
MEMORY AID IN CIVIL LAW
Assurance Corp (s! Ororama Supermart0 +7 SCRA
)&)' as an original promissory and debtor from the
beginning.
5. Underta5in" is to creditor and not to de#tor!
NOTE: The surety ma!es no covenant or
agreement 8it$ t$e 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 creditor is given the right to sue the
principal, or the latter and the surety at the same
time. $Arran6 (s! 9anila :idelity ; Surety Co!0
nc!0 *7* P$il! )%)'
6. Surety is not entitled to notice of principal<s
default
NOTE: The creditor owes no duty of active
diligence to ta!e care of the interest of the surety
and the surety is bound to ta!e notice of the
principal<s default and to perform the obligation.
=e cannot complain that the creditor has not
notified him in the absence of a special agreement
to that effect. $Palmares (s CA0 )++ SCRA 3))'
7. Prior demand #y t$e creditor upon principal is not
re=uired
NOTE: As soon as the principal is in default, the
surety li!ewise is in default.
8. Surety is not e/onerated #y ne"lect of creditor to
sue principal
C&aracteristics of 7uaranty an( Suretys&ip:
1. Accessory - 6t is indispensable condition for its
eistence that there must be a principal
obligation.
NOTES:
-uaranty may be constituted to guarantee the
performance of a voidable or unenforceable
contract. 6t may also guarantee a natural
obligation. $Art 2A72'
The guarantor cannot bind himself for more
than the principal debtor and even if he does,
his liability shall be reduced to the limits of
that of the debtor.
2. Su#sidiary and Conditional - ta!es effect only in
case the principal debtor fails in his obligation.
NOTES:
The guarantor cannot bind himself for more
than the principal debtor and even if he does,
his liability shall be reduced to the limits of
that of the debtor. 4ut a guarantor may bind
himself for less than that of the principal $Art
2A7('
A guaranty may be given as security for future
debts, the amount of which is not yet !nown"
there can be no claim against the guarantor
until the debt is li#uidated. A conditional
obligation may also be secured. $Art 2A7&'
3. Unilateral - may be entered even wCo the
intervention of the principal debtor, in which
case Art. 12&8 and 12&B 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.
4. +ominate
5. ,onsensual
6. 6t is a contract between the guarantorCsurety
and creditor.
NOTES:
Acceptance of 1uaranty 0y cre(itor an(
notice t&ereof to 1uarantor:
6n declaring that guaranty must be
epress, the law refers solely and
eclusively to the obligation of the
guarantor because it is he alone who
binds himself by his acceptance. Dith
respect to the creditor, no such
re#uirement is needed because he binds
himself to nothing.
=owever, when there is merely an offer
of a "uaranty, or merely a conditional
"uaranty, in the sense that it re#uires
action by the creditor before the
obligation becomes fied, it does not
become binding until it is accepted and
until notice of such acceptance by the
creditor is given to, or ac#uired by, the
guarantor, or until he has notice or
!nowledge that the creditor has
performed the condition and intends to
act upon the guaranty.
4ut in any case, the creditor is not
precluded from waiving the re#uirement
of notice.
The consideration of the guaranty is the
same as the consideration of the principal
obligation.
The creditor may proceed against the
guarantor although he has no right of action
against the principal debtor.
B. +ot presumed. 6t must be epressed and
reduced in writing.
NOTE: A power of attorney to loan money does
not authori@e the agent to ma!e the principal
liable as a surety for the payment of the debt of
a third person. $4P (s! Coster0 3% P$il! '23'
9. Jalls under the Statute of Jrauds since it is a
>special promise to answer for the debt, default
or miscarriage of another?.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#2
MEMORY AID IN CIVIL LAW
%. Strictly interpreted against the creditor and in
favor of the guarantorCsurety and is not to be
etended beyond its terms or specified limits.
$9a"dalena Estates0 nc! (s Rodri"ue60 *+ SCRA
2&%' The rule of strictissimi >uris commonly
pertains to an accommodation surety because the
latter acts without motive of pecuniary gain and
hence, should be protected against un)ust
pecuniary impoverishment by imposing on the
principal, duties a!in to those of a fiduciary.
NOTES:
The rule will apply only after it has been
definitely ascertained that the contract is one
of suretyship or guaranty. 6t cannot be used as
an aid in determining whether a party<s
underta!ing is that of a surety or guarantor.
$Palmares (s CA0 )++ SCRA )2)'
6t does not apply in case of compensated
sureties.
1A. 6t is a contract which re#uires that the guarantor
must be a person distinct form the debtor because
a person cannot be the personal guarantor of
himself.
NOTE: =owever, in a real guaranty, li!e pledge
and mortgage, a person may guarantee his own
obligation with his personal or real properties.
7uaranty Suretys&ip
1. Fiability depends
upon an independent
agreement to pay the
obligation if primary
debtor fails to do so
1. Surety assumes
liability as regular
party to the
underta!ing
2. ,ollateral under-
ta!ing
2. Surety is an
original promisor
&. -uarantor is
secondarily liable
&. Surety is
primarily liable
4. -uarantor binds
himself to pay if
the principal
,A++1T 2AL
(. Surety underta!es
to pay if the principal
513S +1T 2AL
7. 6nsurer of
solvency of debtor
7. 6nsurer of the
debt
8. -uarantor can
avail of the benefit
of ecussion and
division in case
creditor proceeds
against him
8. Surety cannot
avail of the benefit of
ecussion and division
In(orsement 7uaranty
1. 2rimarily of
transfer
1. ,ontract of
security
2. /nless the note is
promptly presented
for payment at
maturity and due
notice of dishonor
given to the indorser
within a reasonable
time he will be
discharged abso-
lutely from all
liability thereon,
whether he has
suffered any actual
damage or not
2. Jailure in either or
both of these
particulars does not
generally wor! as an
absolute discharge of
a guarantor<s liability,
but his is discharged
only to the etent of
the loss which he may
have suffered in
conse#uence thereof
&. 6ndorser does not
warrant the solvency.
=e is answerable on a
strict compliance
with the law by the
holder, whether the
promisor is solvent or
not
&. -uarantor
warrants the solvency
of the promisor
(. 6ndorser can be
sued as promisor
(. -uarantor cannot be
sued as promisor
7uaranty >arranty
A contract by which a
person is bound to
another for the
fulfilment of a
promise or
engagement of a
third party
An underta!ing that
the title, #uality, or
#uantity of the
sub)ect matter of the
contract is what it
has been represented
to be, and relates to
some agreement
made ordinarily by
the party who ma!es
the warranty
NOTES:
A guaranty is gratuitous, unless there is a
stipulation to the contrary. The cause of the
contract is the same cause which supports the
obligation as to the principal debtor.
The peculiar nature of a guaranty or surety
agreement is that is is regarded as valid despite
the absence of any direct consideration received
by the guarantor or surety either from the
principal debtor or from the creditor" a
consideration moving to the principal alone will
suffice.
6t is never necessary that the guarantor or
surety should receive any part or benefit, if
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#3
MEMORY AID IN CIVIL LAW
such there be, accruing to the principal. $Dille
2lastic 6ndustries ,orp. vs. ,A, 278 S,0A (B9'
Dou0le or su0*1uaranty (Art -8, -n( par%
1ne constituted to guarantee the obligation of a
guarantor
Continuin1 1uaranty (Art -8,"%
1ne which is not limited to a single transaction
but which contemplates a future course of
dealings, covering a series of transactions
generally for an indefinite time or until revo!ed.
NOTES:
2rospective in operation $?i@o (s CA0 )*& SCRA 2'
,onstrued as continuing when by the terms
thereof it is evident that the ob)ect 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 epressly reserved $?i@o (s CA0 )*&
SCRA 2'
>Juture debts? may also refer to debts eisting at
the time of the constitution of the guaranty but
the amount thereof is un!nown and not to debts
not yet incurred and eisting at that time.
3ception to the concept of continuing guaranty is
c$attel mort"a"e. A chattel mortgage can only
cover obligations eisting at the time the
mortgage is constituted and not those contracted
subse#uent to the eecution thereof -T$e 4el"ian
Cat$olic 9issionaries0 nc! (s! 9a"allanes Press0
nc!0 32 P$il &3%.! An eception to this is in case
of stoc!s in department stores, drug stores, etc.
-Torres (s! Lim>ap0 '& P$il *3*.!
E:tent of 7uarantorCs lia0ility: (Art -8,,%
1. Dhere the guaranty definite* 6t is limited in whole
or in part to the principal debt, to the eclusion of
accessories.
2. Dhere guaranty indefinite or simple* 6t shall
comprise not only the principal obligation, but
also all its accessories, including the )udicial
costs, provided with respect to the latter, that the
guarantor shall only be liable for those costs
incurred after he has been )udicially re#uired to
pay.
Dualifications of a 1uarantor: (Arts -8,$*-8,<%
1. possesses integrity
2. capacity to bind himself
3. has sufficient property to answer for the
obligation which he guarantees
NOTES:
The #ualifications need only be present at the
time of the perfection of the contract.
The subse#uent loss of the integrity or property
or supervening incapacity of the guarantor
would not operate to eonerate the guarantor
or the eventual liability he has contracted, and
the contract of guaranty continues.
=owever, the creditor may demand another
guarantor with the proper #ualifications. 4ut he
may waive it if he chooses and hold the
guarantor to his bargain.
Benefit of E:cussion (Art -8,@%
The right by which the guarantor cannot be
compelled to pay the creditor unless the latter
has ehausted all the properties of the principal
debtor, and has resorted to all of the legal
remedies against such debtor.
NOTE:
+ot applicable to a contract of suretyship $Arts
2A(B, par. 2" 2A7%:2;'
,annot even begin to ta!e place before
)udgment has been obtained against the debtor
$4aylon vs ,A, &12 S,0A 7A2'
>&en 7uarantor is not entitle( to t&e 0enefit of
e:cussion: $2A60S'
1. 6f it may be presumed that an eecution on the
property of the principal debtor would not
result in the satisfaction of the obligation
+ot necessary that the debtor be )udicially
declared insolvent or ban!rupt
2. Dhen he has absconded, or cannot be sued
within the 2hilippines unless he has left a
manager or representative
&. 6n case of insolvency of the debtor
.ust be actual
(. 6f the guarantor has epressly renounced it
7. 6f he has bound himself solidarily with the
debtor
Ot$er "rounds: (BIPS%
8. 6f he is a )udicial 0ondsman or sub-surety
B. 6f he fails to interpose it as a defense before
)udgment is rendered against him
9. 6f the guarantor does not set up the benefit
against the creditor upon the latter<s demand
for payment from him, and point out to the
creditor available property to the debtor within
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#4
MEMORY AID IN CIVIL LAW
2hilippine territory, sufficient to cover the amount
of the debt $Art 2A8A'
5emand can be made only after )udgment on
the debt
5emand must be actual" )oining the guarantor
in the suit against the principal debtor is not
the demand intended by law
%. Dhere the pledge or mortgage has been given by
him as special security
Benefit of Di?ision (Art -8$,%
Should there be se(eral "uarantors of only one
de#tor and for the same de#t, the obligation to
answer for the same is divided among all.
Fiability* Goint
NOTES:
The creditor can claim from the guarantors only
the shares they are respectively bound to pay
e/cept 8$en solidarity is stipulated or if any of
t$e circumstances enumerated in Article )7'2
s$ould ta5e place!
The right of contribution of guarantors who pays
re#uires that the payment must have been made
$a' in virtue of a )udicial demand, or $b' because
the principal debtor is insolvent $Art 2AB&'.
6f any of the guarantors should be insolvent, his
share shall be borne by the others including the
paying guarantor in the same )oint proportion
following the rule in solidary obligations.
The above rule shall not be applicable unless the
payment has been made in virtue of a )udicial
demand or unless the principal debtor is insolvent.
The right to contribution or reimbursement from
his co-guarantors is ac#uired ipso >ure by virtue of
said payment without the need of obtaining from
the creditor any prior cession of rights to such
guarantor.
The co-guarantors may set up against the one who
paid, the same defenses which have pertained to
the principal debtor against the creditor and
which are not purely personal to the debtor. $Art
2AB('
Proce(ure =&en cre(itor sues: $Art. 2A82'
The creditor must sue the principal alone" the
guarantor cannot be sued with his principal, much
less alone ecept in Art. 2A7%.
*! Notice to "uarantor of t$e action
The guarantor must be +1T6J635 so that he
may appear, if he so desires, and set up
defenses he may want to offer.
6f the guarantor appears, he is still given the
benefit of ehaustion even if )udgment
should be rendered against him and
principal debtor. =is voluntary appearance
does not constitute a renunciation of his
right to ecussion $see Art. 2A7%$1''.
-uarantor cannot set up the defenses if he
does not appear and it may no longer be
possible for him to #uestion the validity of
the )udgment rendered against the debtor.
2. A guarantor is entitled to be heard before and
eecution can be issued against him where he is
not a party in the case involving his principal
$procedural due process'.
7uarantorCs Ri1&t of In(emnity or Reim0ursement
(Art -8$$%
GENERAL RULE: -uaranty is a contract of
indemnity. The guarantor who ma!es payment is
entitled to be reimbursed by the principal debtor.
NOTE: The indemnity consists of* (DIED%
1. Total amount of t$e e#t no right to
demand reimbursement until he has actually
paid the debt, unless by the terms of the
contract, he is given the right before ma!ing
payment. =e cannot collect more than
what he has paid.
2. Le"al interest thereon from the time the
payment was made !nown $notice of
payment in effect a demand so that if the
debtor does not pay immediately, he incurs
in delay' to the debtor, even though it did
not earn interest for the creditor.
-uarantor<s right to legal interest is granted
by law by virtue of the payment he has
made.
3. +/penses incurred #y t$e "uarantor after
having notified the debtor that payment has
been demanded of him by the creditor" only
those epenses that the guarantor has to
satisfy in accordance with law as a
conse#uence of the guaranty $Art. 2A77' not
those which depend upon his will or own
acts or his fault for these are his eclusive
personal responsibility and it is not )ust that
they be shouldered by the debtor.
4. ,ama"es if they are due in accordance
with law. -eneral rules on damages apply.
EXCEPTONS:
1. Dhere the guaranty is constituted without
the !nowledge or against the will of the
principal debtor, the guarantor can recover
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#
MEMORY AID IN CIVIL LAW
only insofar as the payment had been
beneficial to the debtor $Art. 2A7A'.
2. 2ayment by a third person who does not
intend to be reimbursed by the debtor is
deemed to be a donation, which, however,
re#uires the debtor<s consent. 4ut the
payment is in any case valid as to the creditor
who has accepted it $Art. 12&9'.
&. Daiver of the right to demand reimbursement.
7uarantorCs ri1&t to Su0ro1ation (ART/-8$<%
Subrogation transfers to the person subrogated,
the credit with all the rights thereto appertaining
either against the debtor or against third persons,
be they guarantors or possessors of mortgages,
sub)ect to stipulation in conventional subrogation.
NOTE: This right of subrogation is necessary to enable
the guarantor to enforce the indemnity given in Art.
2A88.
6t arises by operation of law upon payment by the
guarantor. 6t is not necessary that the creditor
cede to the guarantor the former<s rights against
the debtor.
6t is not a contractual right. The right of
guarantor who has paid a debt to subrogation does
not stand upon contract but upon the principles of
natural )ustice.
The guarantor is subrogated by virtue of the
payment to the rights of the creditor, not those of
the debtor.
-uarantor cannot eercise the right of
redemption of his principal $Urrutia ; Co (s
9orena and Reyes0 )+ P$il )&*'
Effect of Payment 0y 7uarantor
/ >it&out notice to (e0tor: (Art -8$@%
The debtor may interpose against the
guarantor those defenses which he could have
set up against the creditor at the time the
payment was made, e.g. the debtor can set up
against the guarantor the defense of previous
etinguishment of the obligation by payment.
-/ Before )aturity (Art -8$!%
+ot entitled to reimbursement unless the
payment was made with the consent or has
been ratified by the debtor
Effect of Repeat Payment 0y (e0tor: (Art -8<8%
GENERAL RULE: 4efore guarantor pays the creditor,
he must first notify the debtor $Art. 2A89'. 6f he fails
to give such notice and the debtor repeats payment,
the guarantor can only collect from the creditor and
guarantor has no cause of action against the debtor
for the return of the amount paid by guarantor even
if the creditor should become insolvent.
EXCEPTON: The guarantor can still claim
reimbursement from the debtor in spite of lac! of
notice if the following conditions are present* (PI7%
a. guarantor was prevented by fortuitous event
to advise the debtor of the payment" and
b. the creditor becomes insolvent"
c. the guaranty is 1ratuitous.
Ri1&t of 7uarantor to procee( a1ainst (e0tor
before payment
GENERAL RULE: -uarantor has no cause of action
against debtor until after the former has paid the
obligation
EXCEPTON: Article 2AB1
NOTES:
Article 2AB1 is applicable and available to the
surety. $9anila Surety ; :idelity Co!0 nc! (s
4atu Construction ; Co!0 *7* P$il 323'
0emedy of guarantor*
$a' obtain release from the guaranty" or
$b' demand a security that shall protect him
from any proceedings by the creditor, and
against the danger of insolvency of the
debtor
Art/ -8$$ Art/ -8<
2rovides for the
enforcement of the
rights of the
guarantorCsurety
against the debtor
after he has paid the
debt
2rovides for his
protection #efore he
has paid but after he
has become liable
-ives a right of
action after payment
2rotective remedy
#efore payment.
Substantive right 2reliminary remedy
E:tin1uis&ment of 1uaranty: $0A
2
,3
2
'
1. Release in favor of one of the guarantors,
without the consent of the others, benefits all
to the etent of the share of the guarantor to
whom it has been granted $Art 2AB9'"
2. 6f the creditor voluntarily accepts immovable or
other properties in payment of the debt, even if
he should afterwards lose the same through
eviction or conveyance of property $Art 2ABB'"
&. Dhenever by some act of the creditor, the
guarantors even though they are solidarily liable
cannot be subrogated to the rights, mortgages
and preferences of the former $Art 2A9A'"
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#!
MEMORY AID IN CIVIL LAW
(. Jor the same causes as all other obligations $Art
12&1'"
7. Dhen the principal obligation is etinguished"
8. Etension granted to the debtor by the creditor
without the consent of the guarantor $Art 2AB%'
BOND
An underta!ing that is sufficiently secured, and
not cash or currency
Bon(sman (Art -8@-%
A surety offered in virtue of a provision of law or a
)udicial order. =e must have the #ualifications
re#uired of a guarantor and in special laws li!e
the 0ules of ,ourt.
NOTES:
Gudicial bonds constitute merely a special class of
contracts of guaranty by the fact that they are
given >in virtueM of a )udicial order.?
6f the person re#uired to give a legal or )udicial
bond should not be able to do so, a pledge or
mortgage sufficient to cover the obligation shall
admitted in lieu thereof $Art 2A9&'
A )udicial bondsman and the sub-surety are +1T
entitled to the benefit of ecussion because they
are not mere guarantors, but sureties whose
liability is primary and solidary. $Art 2A9('
PLED7EE )ORT7A7E AND ANTICBRESIS
I/ Common Elements of Ple(1eE )ort1a1eE an(
Antic&resis (Articles -8@, # -8!-%
A/ +ssentia$ &e-uisites (SOD% (Art -8@,%
1. Secures the fulfillment of a principal obligation"
2. 2ledgor, mortgagor, antichretic 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 rule is that the seller
must be the owner of the thing sold $,avite
5evelopment 4an! vs. Fim, &2( S,0A &(8'
&. 2ledgor, mortgagor, antichretic debtor must have
free (isposal of their property, or be legally
authori@ed for such purpose.
NOTES:
Third persons can pledge or mortgage their own
property to secure the principal obligation.
6t is not necessarily void simply because the
accommodation pledgor or mortgagor did not
benefit from 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 $GSS (s CA0 *%7 SCRA
',,'
The accommodation pledgor or mortgagor,
without epressly assuming personal liability for
such debt, is not liable for the payment of any
deficiency, should the property not be sufficient
to cover the debt $4an5 of America (s!
American Realty Corporation0 ,)* SCRA &'2'.
The accommodation pledgor or mortgagor is not
solidarily bound with the principal obligor but
his liability etents only to the property pledged
or mortgaged. Should there be any deficiency,
the creditor has recourse on the principal
debtor who remains to be primarily bound.
The law grants to the accommodation pledgor or
mortgagor the same rights as a guarantor and he
cannot be pre)udiced by any waiver of defense
by the principal debtor.
B/ Prohibition against Pactu' Co''issoriu'
(Art -8@@F -"<%
Pactum Commissorium
Stipulation whereby the thing pled"ed or
mort"a"ed, or under antic$resis shall
automatically become the property of the
creditor in the event of non-payment of the
debt within the term fied.
Re4uisites:
1. There should be a pledge, mortgage, or
antichresis of property by way of security for
the payment of the principal obligation" and
2. There should be a stipulation for an automatic
appropriation by the creditor of the property in
event of nonpayment of the obligation within
the stipulated period.
GENERAL RULE: 2actum ,ommissorium is
forbidden by law and is declared null and void.
EXCEPTON: The pledgee may appropriate the
thing pledged if after the first and second auctions,
the thing is not sold. $Art 2112'
NOTE: The security contract remains valid" only
the prohibited stipulation is void.
C/ Capabi$it) to secure a$$ #ins of ob$igations.
i.e. pure or conitiona$ (Art -8!%
D/ (ni/isibi$it) (Art -8@!%
GENERAL RULE: A pledge, mortgage, or antichresis
is ini/isib$e, even though the debt may be divided
among the successors in interest of the debtor or of
the creditor.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#"
MEMORY AID IN CIVIL LAW
Their indivisibility is not affected by the fact that
the debtors are )ointly or not solidarily liable.
Conse4uences of in(i?isi0ility:
1. Sin"le t$in" 3very portion of the property
pledged or mortgaged is answerable for the whole
obligation
2. Se(eral t$in"s All of the several things pledged
or mortgaged are liable for the totality of the debt
&. ?e#tor<s $eirAcreditor<s $eir - +either the
debtor<s heir who has paid part of the debt cannot
as! for proportionate etinguishment, nor
creditor<s heir who received his share of the debt
return the pledge or cancel the mortgage as long
as the debt is not completely satisfied.
EXCEPTONS:
1. Dhere each one of several things guarantees a
determinate portion of the credit
2. Dhere only a portion of the loan was released
&. Dhere there was failure of consideration.
(. Dhere there is no debtor-creditor
relationship
NOTES:
The mere embodiment of a real estate mortgage
and a chattel mortgage in one document does not
have the effect of fusing both securities into an
indivisible whole.
The mortgagee, therefore, may legally foreclose
the real estate mortgage etra)udicially and waive
the chattel mortgage foreclosure, and maintain
instead a personal action for the recovery of the
unpaid balance of the credit $2hil. 4an! of
,ommerce vs. .acadaeg, 1A% 2hil %91'
E/ "hen the principa$ ob$igation beco'es ue. the
things in which the p$ege. 'ortgage. or
antichresis consists 'a) be a$ienate for the
pa)'ent to the creitor. (Art/ -8@<%
NOTES:
6f the debtor fails to comply with the obligation at
the time it falls due, the creditor is merely
entitled to move for the sale of the thing pledged
or mortgaged in order to collect the amount of his
claim from the proceeds.
6f he wishes to secure a title to the mortgaged
property, he can buy it in the foreclosure sale
$.ontevirgin vs. ,A, 112 S,0A 8(1'
0. P$egor. 'ortgagor. antichretic ebtor retains
ownership of the thing gi/en as a securit)
PLED7E (Arts -8!" # --"%
A contract wherein the debtor delivers to the
creditor or to a third person a movable or
document evidencing incorporeal rights for the
purpose of securing fulfilment of a principal
obligation with the understanding that when the
obligation is fulfilled, the thing delivered shall
be returned with all its fruits and accessions.
Special Re4uisites 1in aition to the co''on
essentia$ re-uisites2:
1. 2ossession of the thing pledged must be
transferred to the creditor or a third person by
agreement $Art 2A%&'"
2. 6t can only cover movable property and
incorporeal rights evidenced by documents of
title and the instruments proving the right
pledged shall be delivered to the creditor, and if
negotiable must be endorsed $Art 2A%('" and
&. The description of the thing pledged and the
date must appear in a public instrument to bind
third persons, but not for the validity of the
contract $Art 2A%8'.
'in(s:
1. Con(entional ABoluntary created by contract
2. Le"al created by operation of law $eamples*
Art. 7(8, 1B&1 and 1%1( +,,'
NOTES:
The provisions of possession, care and sale of
the thing as well as on the termination of the
pledge governing conventional pledges are
applicable to pledges created by operation of
law $Art 2121'
/nli!e, however, in conventional pledge where
the debtor is not entitled to the ecess unless it
is otherwise agreed, in legal pledge, the
remainder of the price of the sale after
payment of the debt and epenses, shall be
delivered to the debtor.
6n legal pledge, there is no definite period for
the payment of the principal obligation. The
pledgee must ma!e a demand for the payment
of the amount due him" otherwise he cannot
eercise the right of sale at public auction $Art
2122'
C&aracteristics:
1. Real contract it is
perfected by the delivery of the thing pledged
by the debtor who is called the pled"or to the
creditor who is called the pled"ee, or to a third
person by common agreement"
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1#8
MEMORY AID IN CIVIL LAW
2. Accessory contract it
has no independent eistence of its own"
&. Unilateral contract it
creates an obligation solely on the part of the
creditor to return the thing sub)ect thereof upon
the fulfilment of the principal obligation" and
(. Su#sidiary contract
the obligation incurred does not arise until the
fulfilment of the principal obligation which is
secured.
Consi(eration in ple(1e:
6nsofar as the pledgor is concerned, the cause is
the principal obligation.
6f the pledgor is not the debtor, the cause is the
compensation stipulated for the pledge or the
mere liberality of the pledgor.
E:tent of ple(1e: /nless stipulated otherwise, pledge
etends to the fruits, interests or earnings of the
thing.
Ri1&ts an( O0li1ations of a Ple(1or
Ri1&ts O0li1ations
1. To demand return in
case of reasonable
grounds to fear
destruction or
impairment of the thing
without the pledgee<s
fault, sub)ect to the
duty of replacement
$Art 21AB'
2. To bid and be
preferred at the public
auction $Art 211&'
&. To alienate the thing
pledged provided the
pledgee consents to the
sale $Art 2A%B'
(. To as! that the thing
pledged be deposited
$Arts 21A( N 21A8'
1. To advise the
pledgee of the
flaws of the thing
$Art 21A1'
2. +ot to demand
the return of the
thing until after
full payment of
the debt,
including interest
due thereon and
epenses incurred
for its
preservation $Art
21A7'
Ri1&ts of t&e Ple(1ee
CED: ? S4C 4A
)
R
)
OPS
)
1. 1ption to (emand replacement or immediate
payment of the debt in case of deception as to
substance or #uality $Art 21A%'
2. To sell at public auction in case of reasonable
grounds to fear destruction or impairment of the thing
without his fault $Art 21A9'
&. To 0ring actions pertaining to the owner $Art 21A&'
(. To choose which of several things pledged shall be
sold
7. To 0id at the public auction $Art 211&'
8. To appropriate the thing in case of failure of the
2
nd
public auction $Art 2112'
B. To apply said fruits, interests or earnings to the
interest, if any, then to the principal of the credit
$Art 21A2'
9. To retain ecess value received in the public
sale $Art 2117'
%. To retain the thing until after full payment of
the debt $Art 2A%9'
1A. To be reimbursed for the epenses made for the
preservation of the thing pledged $Art 2A%%'
11. To ob)ect to the alienation of the thing
12. To possess the thing $Art 2A%9'
1&. To sell at public auction in case of non-payment
of debt at maturity $Art 2112'
To choose which of the several things pledged shall
be sold $Art 211%'
1(. 1ption to (emand replacement or immediate
payment of the debt in case of deception as to
substance or #uality $Art 21A%'
17. To sell at public auction in case of reasonable
grounds to fear destruction or impairment of the
thing without his fault $Art 21A9'
18. To 0ring actions pertaining to the owner $Art
21A&'
1B. To choose which of several things pledged shall
be sold
19. To 0id at the public auction $Art 211&'
1%. To appropriate the thing in case of failure of the
2
nd
public auction $Art 2112'
2A. To apply said fruits, interests or earnings to the
interest, if any, then to the principal of the credit
$Art 21A2'
21. To retain ecess value received
in the public sale $Art 2117'
22. To retain the thing until after full payment of
the debt $Art 2A%9'
2&. To be reimbursed for the epenses made for the
preservation of the thing pledged $Art 2A%%'
2(. To ob)ect to the alienation of the thing
27. To possess the thing $Art 2A%9'
28. To sell at public auction in case of non-payment
of debt at maturity $Art 2112'
2B. To choose which of the several things pledged
shall be sold $Art 211%'
O0li1ations of t&e Ple(1ee
CED: CU?A
,
1. Ta!e care of the thing with the diligence of a
good father of a family $Art 2A%%'
2. Not to use thing unless authori@ed or by the
owner or its preservation re#uires its use $Art 21A('
&. Not to deposit the thing with a &
rd
person unless
so stipulated $Art 21AA'
(. 0esponsibility for acts of agents and employees as
regards the thing $Art 21AA'
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
1##
MEMORY AID IN CIVIL LAW
7. To advise pledgor of danger to the thing $Art 21AB'
8. To advise pledgor of the result of the public auction
$Art 2118'
RI7BT O6 PLED7OR TO S+BSTIT+TE TBIN7 PLED7ED
(ART/-8<%
Re4uisites:
1. The pledgor has reasonable grounds to fear
the destruction or impairment of the thin
pledged
2. There is no fault on the part of the pledgee
&. The pledgor is offering in place of the thing,
another thing in pledge which is of the same
!ind and #uality as the former
(. The pledge does not choose to eercise his
right to cause the thing pledged to be sold at
public auction
NOTE: The pledgee<s right to have the thing pledged
sold at public sale granted under the Article 21A9 is
superior to that given to the pledgor to substitute the
thing pledged under Article 21AB.
Pro&i0ition a1ainst (ou0le ple(1e
2roperty which has been lawfully pledged to one
creditor cannot be pledged to another as long as
the first one subsists.
NOTE: 2ossession of a creditor of the thing pledged is
an essential re#uisite of pledge.

E:tin1uis&ment of Ple(1e (CRAPS%
1. Jor the same causes as all other obligations $Art
12&1'
2. Return of the thing pledged by the pledgee to
the pledgor $Art 211A'
&. Statement in 8ritin" by the pledgee that he
renounces or abandons the pledge $Art 2111'
(. Payment of the debt $Art 21A7'
7. Sale of thing pledged at public auction $Art 2117'
NOTE: The possession by the debtor or owner of the
thing pledged subse#uent to the perfection of the
pledge gives rise to a prima facie presumption that
the thing has been returned and, therefore, that the
pledge has been etinguished but not the principal
obligation itself. $Art 211A'
Re4uirements for sale of t&in1 ple(1e( at pu0lic
auction: (Art --%
1. The debt is due and unpaid
2. Sale must be at a public auction
&. there must be notice to the pledgor and owner,
stating the amount due
(. Sale must be with the intervention of a notary
public
Effect of sale of t&e t&in1 ple(1e(: (Art -,%
1. The sale of the thing pledged shall etinguish
the principal obligation, whether or not the
proceeds of the sale are e#ual to the amount of
the principal obligation, interest and epenses
in a proper case
2. 6f the price of the sale is more than the amount
due the creditor, the debtor is not entitled to
the ecess unless the contrary is provided
&. 6f the price of the sale is less, the creditor is not
entitled to recover the deficiency even if there
is a stipulation to that effect
REAL ESTATE )ORT7A7E (Articles --2*-"%
A contract whereby the debtor secures to the
creditor the fulfilment of a principal obligation,
specially sub)ecting to such security immovable
property or real rights over immovable property
in case the principal obligation is not complied
with at the time stipulated.
C&aracteristics of t&e contract:
*! Real
)! Accessory
,! Su#sidiary
(. Unilateral it creates only an obligation on
the part of the creditor who must free the
property from the encumbrance once the
obligation is fulfilled.
NOTES:
As an accessory contract, its consideration is
that of the principal contract from which it
receives life.
A mortgage does not involve a transfer, cession
or conveyance of property but only constitutes a
lien thereon. /ntil discharged, it follows the
property wherever it goes and subsists
notwithstanding changes of ownership.
A mortgage gives the mortgagee no right or
claim to the possession of the property, and
therefore, a mere mortgagee has no right to
e)ect an occupant of the property mortgaged
unless the mortgage should contain some
provision to that effect. The only right of a
mortgagee in case of non-payment of a debt
secured by mortgage would be to foreclose the
mortgage and have the encumbered property
sold to satisfy the outstanding indebtedness. 6f
the possession is transferred to the mortgagee,
it must not epressly be for purpose of applying
the fruits to the interest then to the principal of
the credit, for then it would be an antichresis.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$$
MEMORY AID IN CIVIL LAW
6t is not an essential re#uisite that the principal of
the mortgage credit bears interest, or that the
interest as compensation for the use of the
principal and en)oyment of its fruits be in the
form of a certain percent thereof.
Special Re4uisites 1in aition to the co''on
essentia$ re-uisites2:
1. 6t can cover only immovable property and
alienable real rights imposed upon immovables
$Art 212('"
2. 6t must appear in a public instrument $Art. 2127'"
and
&. 0egistration in the registry of property is
necessary to bind third persons, but not for the
validity of the contract $Art 2127'.
An order for foreclosure cannot be refused on
the ground that the mortgage had not been
registered provided no innocent third parties
are involved.
NOTE: Dhere a mortgage is not valid or false, the
principal obligation which it guarantees is not
rendered null and void. Dhat is lost only is the right to
foreclose the mortgage as a special remedy for
satisfying or settling the indebtedness which is the
principal obligation but the mortgage deed remains as
evidence or proof of a personal obligation of the
debtor and the amount due to the creditor may be
enforced in an ordinary personal action.
'in(s:
1. Boluntary agreed to by the parties or constituted
by the will of the owner of the property on which
it is created
2. Le"al one re#uired by law to be eecuted in
favour of certain persons
The persons in whose favour the law
establishes a mortgage have no other right
than to demand the eecution and the
recording of the document in which the
mortgage is formali@ed $Art 2127 par 2'
&. E=uita#le one which, although lac!ing the
formalities of a mortgage, shows the intention of
the parties to ma!e the property a security for a
debt
PLED7E REAL )ORT7A7E
1. ,onstituted on
movables
1. ,onstituted on
immovables
2. 2roperty is
delivered to pledgee
or by common
consent to a third
person
2. 5elivery is not
necessary
&. +ot valid against
third persons unless a
&. +ot valid against
third persons unless
description of the
thing pledged and
date of pledge
appear in a public
instrument
registered
E:tent of )ort1a1e:
Absent epress stipulation to the contrary, the
mortgage includes the accessions,
improvements, growing fruits and income of the
property not yet received when the obligation
becomes due and to the amount of the
indemnity granted or owing to the proprietor
from the insurers of the property mortgaged, or
in virtue of epropriation for public use $Art
212B'
O0;ect of )ort1a1e:
Juture property cannot be an ob)ect of a
contract of mortgage $Art 2A97:2;' =owever, a
stipulation sub)ecting to the mortgage lien,
properties $improvements' which the mortgagor
may subse#uently ac#uire install, or use in
connection with real property already
mortgaged belonging to the mortgagor is valid
$2eople<s 4an! and Trust ,o. vs. 5ahican Fumber
,o., 2A S,0A 9('
Special Ri1&ts:
1. )ort1a1or * To alienate the mortgaged property
but the mortgage shall remain attached to the
property.
NOTE: A stipulation forbidding the owner from
alienating the immovable mortgage shall be void
$Art 21&A' being contrary to public policy inasmuch
as the transmission of property should not be unduly
impeded.
-/ )ort1a1ee * To claim from a &
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 212%'
NOTE: 6t is necessary that prior demand for
payment must have been made on the debtor and
the latter failed to pay $4P (s Concepcion ; Ei>os0
nc!0 ', P$il 27&'
6oreclosure
The remedy available to the mortgagee by
which he sub)ects the mortgaged property to
the satisfaction of the obligation to secure that
for which the mortgage was given
NOTES:
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$1
MEMORY AID IN CIVIL LAW
6t denotes the procedure adopted by the
mortgagee to terminate the rights of the
mortgagor on the property and includes the sale
itself $?4P (s Fara"o6a0 +3 SCRA &&+'
Joreclosure is valid where the debtor is in default
in the payment of his obligation $Go#onsen"0 1r! (s
CA0 )3& SCRA 3%)'
'in(s:
1. Gudicial ordinary action for foreclosure under
0ule 89 of the 0ules of ,ourt
2. 3tra)udicial when mortgagee is given a special
power of attorney to sell the mortgaged property
by public auction, under Act +o. &1&7
.u(icial
foreclosure
E:tra;u(icial
foreclosure
1. There is court
intervention
1. +o court
intervention
2. 5ecisions are
appealable
2. +ot appealable
because it is
immediately
eecutory
3. 1rder of court
cuts off all rights of
the parties
impleaded
3. Joreclosure does
not cut off right of
all parties involved
4. There is e#uity
of redemption
ecept on ban!s
which provides for
a right of
redemption
4. There is right of
redemption
5. 2eriod of
redemption starts
from the finality of
the )udgment until
order of
confirmation
5. 2eriod to redeem
start from date of
registration of
certificate of sale
6. +o need for a
special power of
attorney in the
contract of
mortgage
6. Special power of
attorney in favor of
mortgagee is
needed in the
contract
NOTES:
A foreclosure sale retroacts to the date of
registration of the mortgage and that a person
who ta!es a mortgage in good faith and for
valuable consideration, the record showing clear
title to the mortgagor, will be protected against
e#uitable claims on the title in favor of third
persons, of which he had no actual or constructive
notice $St! ?ominic Corporation (s! AC *'* SCRA
'%%'.
Dhere there is a right to redeem, inade#uacy of
price is not material because the )udgment debtor
may reac#uire the property or else sell his right
to redeem and thus recover any loss he claims
to have suffered by reason of the price obtained
at the auction sale and conse#uently not
sufficient to set aside the sale. .ere
inade#uacy of the price obtained at the sheriff<s
sale will not be sufficient to set aside the sale
unless >the price is so inade#uate as to shoc!
the conscience of the court? ta!ing into
consideration the peculiar circumstances
attendant thereto. $Sulit (s! CA0 )&+ SCRA 33*.
Should there remain a balance due to the
mortgagee after applying the proceeds of the
sale, the mortgagee is entitled to recover the
deficiency. This rule applies both to )udicial
and etra-)udicial foreclosure real mortgage.
The action to recover a deficiency after
foreclosure prescribes after 1A years from the
time the right of action accrues $Arts 11(2 N
11(('.

Stipulation of upset price or GtipoH
6t is a stipulation in a mortgage of real property
of minimum price at which the property shall be
sold, to become operative in the event of a
foreclosure sale at public auction. 6t is null and
void for the property must be sold to the highest
bidder. 2arties cannot, by agreement,
contravene the law and interfere with the
lawful procedure of the courts $426 vs Lulo, &1
2hil (B8'
E:tra;u(icial foreclosure real property (Act No/
"",%
The law covers only real estate mortgages. 6t is
intended merely to regulate the etra)udicial
sale of the property mortgaged if and when the
mortgagee is given a special power of epress
authority to do so in the deed itself or in a
document anneed thereto.
The authority to sell is not etinguished by the
death of the mortgagor $or mortgagee' as it is
an essential and inseparable part of a bilateral
agreement $Pere6 (s PN40 *% SCRA +,,'.
+o sale can be legally made outside the
province in which the property sold is situated"
and in case the place within said province in
which the sale is to be made is the sub)ect of
stipulation, such sale shall be made in the said
place in the municipal building of the
municipality in which the property or part
thereof is situated.
Proce(ure for e:tra;u(icial foreclosure of 0ot&
real estate mort1a1e un(er Act No/ "", an(
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$2
MEMORY AID IN CIVIL LAW
c&attel mort1a1e un(er Act No/ ,8@ -A!9! No! 22G
*7G7'G70 1anuary *'0 )777.
1. Jiling of application before the 3ecutive Gudge
through the ,ler! of ,ourt
2. ,ler! of ,ourt will eamine whether the
re#uirement of the law have been complied with,
that is, whether the notice of sale has been
posted for not less than 2A days in at least three
$&' public places of the municipality or city where
the property is situated, and if the same is worth
more than 2(AA.AA, that such notice has been
published once a wee! for at least three $&'
consecutive wee!s in a newspaper of general
circulation in the city of municipality
&. The certificate of sale must be approved by the
3ecutive Gudge
(. Dhere the application concerns etra)udicial
foreclosure of real mortgages in different
locations covering one indebtedness, only one
filing fee corresponding to such debt shall be
collected
7. The ,ler! of ,ourt shall issue certificate of
payment indicating the amount of indebtedness,
the filing fees collected, the mortgages sought to
be foreclosed, the description of the real estates
and their respective locations
8. The notice of sale shall be published in a
newspaper of general circulation pursuant to
Section 1, 25 +o. 1AB%
B. The application of shall be raffled among all
sheriffs
9. After the redemption period has epired, the
,ler! of ,ourt shall archive the records.
%. +o auction sale shall be held unless there are at
least two $2' participating bidders, otherwise the
sale shall be postponed to another date. 6f on the
new date set forth for the sale there shall not be
at least two bidders, the sale shall then proceed.
The names of the bidders shall be reported to the
Sheriff of the +otary 2ublic, who conducted the
sale to the ,ler! of ,ourt before the issuance of
the certificate of sale.
NOTES:
The .ortgagor and .ortgagee have no right to
waive the posting and publication re#uirements
under Act. +o. &1&7. +otices are given to secure
bidders and prevent a sacrifice of the property.
,learly, the statutory re#uirements of posting and
publication are mandated, not for the mortgagor<s
benefit, but for the public or third persons.
Jailure to comply with the statutory re#uirements
as to publication of notice of auction sale
constitutes a )urisdictional defect which
invalidates the sale. Fac! of republication of
notice of foreclosure sale made subse#uently after
the original date renders such sale void -PN4 (s!
Nepomuceno Productions nc!0 G!R! No! *,23%2!
?ecem#er )%0 )77)..
Sec & of Act &1&7 does not re#uire personal or
any particular notice on the mortgagor much
less on his successors-in-interest where there is
no contractual stipulation therefor. =ence,
unless re#uired in the mortgage contract, the
lac! of such notice is not a ground to set aside a
foreclosure sale.
+either does Sec & re#uire posting of notice of
sale on the mortgage property and the
certificate of posting is not re#uired, much less
considered indispensable, for the validity of a
foreclosure sale.
Re(emption
6t is the transaction by which the mortgagor
reac#uires or buys bac! the property which may
have passed under the mortgage, or divests the
property of the lien which the mortgage may
have created.
NOTES:
A sale by the mortgagor to a third party of the
mortgaged property during the period for
redemption transfers only the right to redeem
the property and the right to possess, use and
en)oy the same during said period.
Dhere sale with assumption of mortgage not
registered and made without the consent of the
mortgagee, the buyer, thereof, was not validly
substituted as debtor and, hence, had no right
to redeem $4onne(ie (s! CA0 *)' SCRA *))'.
'in(s:
1. E=uity of Redemption right of mortgagor to
redeem the mortgaged property after his
default in the performance of the conditions of
the mortgage within the %A-day period from the
date of the service of the order of foreclosure
or even thereafter but before the confirmation
of the sale. Applies to )udicial foreclosure of
real mortgage and chattel mortgage foreclosure.
NOTE: 0edemption of the ban!ing institutions is
allowed within one year from confirmation of sale.
2. Ri"$t of Redemption right of mortgagor to
redeem the mortgaged property within one year
from the date of registration of the certificate
of sale. Applies only to etra)udicial foreclosure
of real mortgage.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$3
MEMORY AID IN CIVIL LAW
NOTE: The right of redemption, as long as within the
period prescribed, may be eercised irrespective of
whether or not the mortgagee has subse#uently
conveyed the property to some other party $Sta!
"nacia Rural 4an50 nc! (s! CA0 ),7 SCRA '*,'
Perio( of Re(emption
1. 3tra-)udicial $Act O&1&7'
a. natural person one year from registration of
the certificate of sale with 0egistry of 5eeds
b. )uridical person same rule as natural person
c. )uridical person $mortgagee is ban!' - three
months after foreclosure or before
registration of certificate of foreclosure which
ever is earlier $sec. (B, of -eneral 4an!ing
Faw'
2. Gudicial before confirmation of the sale by the
court
NOTE: Allowing a redemption after the lapse of the
statutory period, when the buyer at the foreclosure
sale does not ob)ect but even consents to the
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
the statutory period for redemption $0amire@ vs ,A,
21% S,0A 7%9'.
Amount of t&e re(emption price:
1. .ortgagee is not a ban! $Act +o. &1&7, in relation
to Sec. 29, 0ule &% of 0ules of ,ourt'
a. purchase price of the property
b. 1E interest per month on the purchase price
c. taes paid and amount of purchaser<s prior
lien, if any, with the same rate of interest
computed from the date of registration of
sale, up to the time of redemption
2. .ortgagee is a ban! $-4F 2AAA'
a. amount due under the mortgage deed
b. interest
c. cost and epenses
NOTE: 0edemption price in this case is reduced
by the income received from the property
ANTICBRESIS (Articles -"- *-"!%
A contract whereby the creditor ac#uires the right
to receive the fruits of an immovable of the
debtor, with the obligation to apply them to the
payment of the interest, if owing, and thereafter
to the principal of his credit $Art 21&2'
C&aracteristics
1. Accessory contract it secures the performance of
a principal obligation
2. :ormal contract it must be in a specified form
to be valid, i.e., >in writing.? $Art 21&('
Special Re4uisites 1in aition to the co''on
essentia$ re-uisites2:
1. 6t can cover only the fruits of an immovable
property" $Art 21&2'
2. 5elivery of the immovable is necessary for the
creditor to receive the fruits and not that the
contract shall be binding"
&. Amount of principal and interest must be
specified in writing $Art. 21&('" and
(. 3press agreement that debtor will give
possession of the property to creditor and that
the latter will apply the fruits to the interest, if
any, then to the principal of his credit. $Art
21&2'
NOTE: The obligation to pay interest is not of the
essence of the contract of antichresis, there being
nothing in the ,ode to show that antichresis is only
applicable to securing the payment of interest-
bearing loans. 1n the contrary, antichresis is
susceptible of guaranteeing all !inds of obligations,
pure or conditional
Antic&resis Ple(1e
1. 0efers to real
property
1. 0efers to personal
property
2. 2erfected by mere
consent
2. 2erfected by
delivery of the thing
pledged
&. ,onsensual contract &. 0eal ,ontract
Antic&resis Real )ort1a1e
1. 2roperty is
delivered to creditor
1. 5ebtor usually
retains possession of
the property
2. ,reditor ac#uires
only the right to
receive the fruits of
the property, hence,
it does not produce a
real right
2. ,reditor does not
have any right to
receive the fruits"
but the mortgage
creates a real right
over the property
&. The creditor,
unless there is
stipulation to the
contrary, is obliged to
pay the taes and
charges upon the
estate
&. The creditor has no
such obligation
(. 6t is epressly
stipulated that the
creditor given
possession of the
(. There is no such
obligation on part of
mortgagee
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$4
MEMORY AID IN CIVIL LAW
property shall apply
all the fruits thereof
to the payment of
interest, if owing,
and thereafter to the
principal
Sub)ect matter of both is real property
O0li1ations of antic&retic cre(itor:
1 To pay taes and charges on the estate, including
necessary epenses
NOTE: ,reditor may avoid said obligation by*
a. compelling debtor to reac#uire en)oyment
of the property or
b. by stipulation to the contrary
2 To apply all the fruits, after receiving them, to the
payment of interest, if owing, and thereafter to
the principal
& To render an account of the fruits to the debtor
( To bear the epenses necessary for its
preservation and repair
Reme(ies of cre(itor in case of non*payment of
(e0t
1. 4ring an action for specific performance" or
2. 2etition for the sale of the real property as in a
foreclosure of mortgages under 0ule 89 of the
0ules of ,ourt.$Art 21&B'
NOTES:
The parties, however, may agree on an
etra)udicial foreclosure in the same manner as
they are allowed in contracts of mortgage and
pledge $Ta(era (s! El Eo"ar :ilipino0 nc!0 &+ P$il
%*)'.
A stipulation authori@ing the antichretic creditor
to appropriate the property upon the non-payment
of the debt within the agreed period is void $Art
2A99'.
CBATTEL )ORT7A7E (Articles -28*-2%
A contract by virtue of which personal property is
recorded in the ,hattel .ortgage 0egister as a
security for the performance of an obligation $Art
21(A'.
C&aracteristics
1. Accessory contract it is for the purpose of
securing the performance of a principal obligation
2. :ormal contract registration in the ,hattel
.ortgage 0egister is indispensable for its validity
&. Unilateral contract it produces only obligations
on the part of the creditor to free the thing from
the encumbrance on fulfilment of the obligation.
Special Re4uisites 1in aition to the co''on
essentia$ re-uisites2:
1. 6t can cover only personal or movable property
in general" however, the parties may treat as
personal property that which by its nature
would be real property"
2. 0egistration of the mortgage with the ,hattel
.ortgage 0egister where the mortgagor resides"
if property is located in a different province,
registration in both provinces re#uired"
&. 5escription of the property as would enable the
parties or other persons to identify the same
after reasonable investigation and in#uiry" and
(. Accompanied by an affida(it of "ood fait$ to
bind third persons, but not for the validity of
the contract.
7. 6t can cover only obligations eisting at the time
the mortgage is constituted.
NOTE: A mortgage containing a stipulation in
regard to future advances in the credit will ta!e
effect only from the date the same are made
and not from the date of the mortgage $1aca (s
?a(ao Lum#er Co!0 **, SCRA *7%'
Effect of re1istration: Creates a real ri"$t
The registration of the chattel mortgage is an
effective and binding notice to other creditors
of its eistence and creates a real right or a lien
which, being recorded, follows the chattel
wherever it goes. The registration gives the
mortgagee symbolical possession $Nort$ern
9otors0 nc! (s! Co=uia0 &+ SCRA ,%3'.
Effect of failure to re1ister c&attel mort1a1e in
t&e c&attel mort1a1e re1istry
Article 21(A ma!es the recording in the ,hattel
.ortgage 0egister an essential re#uisite but if
the instrument is not recorded, the mortgage is
ne(ert$eless #indin" #et8een t$e parties. 4ut
the person in whose favour the law establishes a
mortgage has no other right than to demand the
eecution and the recording of the document.
C&attel )ort1a1e Ple(1e
1. 5elivery of the
personal property
to the mortgage is
not necessary
1. 5elivery of the
thing pledged is
necessary
2. registration in
the ,hattel
.ortgage 0egistry
is necessary for its
validity
2. registration not
necessary to be
valid
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$
MEMORY AID IN CIVIL LAW
&. 6f property is
foreclosed, the
e/cess over the
amount due goes to
the debtor
&. 5ebtor is not
entitled to e/cess
unless otherwise
agreed or ecept in
case of legal
pledge
(. 6f there is
deficiency after
foreclosure,
creditor is entitled
to recover the
deficiency from the
debtor, ecept
under Art. 1(9(
(. 6f there is
deficiency, creditor
is not entitled to
recover
notwithstanding
any stipulation to
the contrary
Sub)ect matter of both is movable
property
Affi(a?it of 7oo( 6ait&
1ath in a contract of chattel mortgage wherein
the parties Pseverally swear that the mortgage is
made for the purpose of securing the obligation
specified in the conditions thereof and for no
other purposes and that the same is a )ust and
valid obligation and one not entered into for the
purpose of fraud.? $Sec. 7, ,hattel .ortgage Faw'
Effect of a0sence
The special affidavit is re#uired only for the
purpose of transforming an already valid mortgage
into >preferred mortgage.? Thus, it is not
necessary for the validity of the chattel mortgage
itself but only to give it a preferred status. 6n
other words, its absence vitiates the mortgage
only as against third persons without notice li!e
creditors and subse#uent encumbrancers.
6oreclosure of C&attel )ort1a1e
NOTES:
Joreclosure sale in chattel mortgage is by public
auction under Act +o. 17A9, but the parties may
stipulate that it be by private sale.
The mortgagee may, after thirty $&A' days from
the time of the condition bro!en, cause the
mortgaged property to be sold at public auction by
a public officer. The &A-day period is also a grace
period for the mortgagor to discharge the
mortgage obligation. After the sale of the chattel
at public auction, the right of redemption is no
longer available to the mortgagor $Ca#ral (s!
E(an"elista0 )+ SCRA *777'.
Application of procee( of sale:
1. ,osts and epenses of !eeping and sale
2. 2ayment of the obligation secured by the
mortgage
&. ,laims of persons holding subse#uent
mortgages in their order
(. The balance, if any, shall be paid to the
mortgagor or person holding under him
NOTES:
The creditor may maintain an action for the
deficiency, ecept if the chattel mortgage is
constituted as security for the purchase of
personal property paya#le in instalments $Art.
1(9('.
The action for deficiency may be brought within
ten $1A' years from the time the cause of action
accrues $Arts 11(1 and 11(2'.
1nly e#uity of redemption is available to the
mortgagor" the latter can no longer redeem
after the confirmation of the foreclosure sale.
Ri1&t of re(emption
Dhen the condition of a chattel mortgage is
bro!en the following may redeem*
a' mortgagor"
b' person holding a subse#uent mortgage" or
c' subse#uent attaching creditor.
An attaching creditor who so redeems shall be
subrogated to the rights of the mortgagee and
entitled to foreclose the mortgage in the same
manner that the mortgagee could foreclose it.
The redemption is made by paying or delivering
to the mortgagee the amount due on such
mortgage and the costs, and epenses incurred
by such breach of condition before the sale
thereof $Sec 1&, Act +o. 17A9'.
Ri1&t to possession of foreclose( property
1. 0eal mortgage After the redemption period has
epired, the purchaser of the property has the
right to a conveyance and to be placed in
possession thereof.
NOTES:
2urchaser is not obliged to bring a separate
suit for possession. =e must invo!e the aid
of the courts and as! for a D06T 1J
21SS3SS61+.
Section B of Act +o. &1&7 allows the
purchaser to ta!e possession of the
foreclosed property during the period of
redemption upon filing of an e parte
application and approval of a bond.
2. ,hattel mortgage Dhen default occurs and the
creditor desires to foreclose, the creditor has
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$!
MEMORY AID IN CIVIL LAW
the right to ta!e the property as a preliminary
step for its sale.
NOTE: Dhere the debtor refuses to yield the
property, the creditor<s remedy is to institute an
action either to effect )udicial foreclosure directly
or to secure possession $032F3H6+' as a
preliminary to the sale contemplated in Section 1(
or Act. +o. 17A9
CONC+RRENCE AND PRE6ERENCE O6 CREDITS
(Articles --"$ # --,%
Concurrence of Cre(its
2ossession by two or more creditors of e#ual rights
or privileges over the same property or all of the
property of the debtor
Preference of Cre(its
0ight held by a creditor to be preferred in the
payment of his claim above others out of the
debtor<s assets.
NOTES:
The rules on preference of credits apply only when
two or more creditors have separate and distinct
claims against the same debtor who has
insufficient property!
2reference creates no lien on property, and,
therefore, gives no interest in property, specific or
general, to the preferred creditor but a
preference in application of the proceeds after
the sale. $9olina (s! Somes0 ,* P$il! %&'
The preferential right of credit attains significance
only after the properties of the debtor have been
inventoried and li#uidated, and the claims held by
his various creditors have been established. $?4P
(s! NLRC0 *+, SCRA ,)+'
Preference of
Cre(it
Lien
Applies only to
claims which do
not attach to
specific
properties
,reates a charge
on a particular
property
Lia0ility of (e0torCs property for &is o0li1ations
GENERAL RULE: 5ebtor is liable with all his property,
present and future, for the fulfilment of his
obligations. $Art 22&8'
EXE9PT PROPERTD:
1. 2resent property those provided under Arts.
177 and 2A7 of the Jamily ,ode, Sec. 1&, 0ule
&% of the 0ules of ,ourt, and Sec. 119 of the
2ublic Fand Act
2. Juture property a debtor who obtains a
discharge from his debts on account of his
insolvency, is not liable for the unsatisfied
claims of his creditors with said property
sub)ect to certain eceptions epressly
provided by law. $Secs. 89, 8%, The
6nsolvency Faw :Act +o. 1%78;'
&. 2roperty under legal custody and those
owned by municipal corporations necessary
for governmental purposes
7eneral Cate1ories of Cre(it:
1. Specia$ Preferre Creits - those listed in
Arts. 22(1 and 22(2 shall be considered as
mortgages and pledges of real or personal property
or liens $Art. 22(&'. =ence, they are not included in
the insolvent debtorIs assets.
NOTES:
Arts. 22(1 and 22(2 do not give the order of
preference or priority of payment. They merely
enumerate the credits which en)oy preference
with respect to specific movables or
immovables. Dith respect to the same specific
movables or immovables, creditors, with t$e
e/ception of t$e State -No! *., merely concur.
They only find application when there is a
concurrence of credits, i.e., when the same
specific property of the debtor is sub)ected to
the claims of several creditors and the value of
such property is insufficient to pay in full all the
creditors. 6n such a situation, the #uestion of
preference will arise.
Article 22(2 ma!es no distinction between
registered and unregistered vendor<s lien $+o.
2'. =ence, any lien of that !ind en)oys the
preferred credit status. /nli!e the unpaid price
of real property sold, mortgage credits $+o. 7',
in order to be given preference, should be
recorded in the 0egistry of 2roperty. 4ut a
recorded mortgage credit is superior to an
unrecorded unpaid vendor<s lien $?e 4arretto
(s! Billanue(a0 * SCRA )++'
The priority rule applies to credits annotated in
the 0egistry of 2roperty. As to credits mentioned
in +o. B of Article 22(2, there is preference
among the attachments or eecutions according
to the order of the time they were levied upon
the property. The pro rata rule in Article 22(%
does not apply" otherwise, the result would be
absurd. The preference of a credit annotated by
an attachment or eecution could be defeated
by simply obtaining a writ of attachment or
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$"
MEMORY AID IN CIVIL LAW
eecution, no matter how much later $9ana#at (s
La"una :ederation of :acomas0 nc!0 *2 SCRA &)*'.
The last paragraph of Article 22(1 applies only
when the right of ownership in such property
continues in the debtor, and, therefore, it is not
applicable to cases where the debtor has parted
with his ownership therein, as where he has sold
the property $Pe@a (s! 9itc$ell0 2 P$il '+%'
2. Orinar) Preferre Creits - those listed in Art.
22(( as amended by Art. 11A of the Fabor ,ode.
NOTES:
The provision not only enumerates the preferred
credits with respect to other property, real and
personal, of the debtor, but also gives their order
of preference >in the order named?.
6n contrast with Articles 22(1 and 22(2, Article
22(( creates no liens on determinate property
which follow such property. Dhat Article 22((
creates are simply rights in favour of certain
creditors to have the cash and other assets of the
insolvent applied in a certain se#uence or order of
priority.
Article 22((, particularly par $1(' item $1'
thereof, is not applicable to obligations of the
State as it is a recogni@ed doctrine that the State
is always solvent. 6t is inconceivable for the State
to voluntarily initiate insolvency or general
li#uidation proceedings or to be sub)ected to such
proceedings under its own laws.
&. Co''on Creits those listed under Art. 22(7,
which shall be paid pro rata regardless of dates.
NOTE: 1rdinary 2referred and ,ommon ,redits cover
only >free property? of the debtor, or those not
sub)ected to Special 2referred ,redit.
Effects of Article 8 of La0or Co(e to Art --22:
1. 0emoved the one-year limitation found in +o. 2 of
Art. 22((
2. .oving up the claims for unpaid wages $and other
monetary claims' of laborers or wor!ers of
insolvent from second priority to first priority in
the order of preference established by Art. 22((
NOTES:
6n case of ban!ruptcy or li#uidation of the
employer<s business, the unpaid wages and other
monetary claims of the employees shall be given
first preference and shall be paid in full before
the claims of the government and other creditors
may be paid. The terms, >declaration? of
ban!ruptcy, or >)udicial? li#uidation have been
eliminated, nevertheless, according to the S,,
ban!ruptcy or li#uidation proceedings are still
necessary for the operation of the preference
accorded to wor!ers under Art. 11A of the Fabor
,ode. $?4P (s! NLRC *+, SCRA ,)+H RA No! &%*'
Sec *7'
6n case of rehabilitation, the preference of
credit granted to employees under Art 11A of
the Fabor ,ode is not applicable $Ru##er8orld
IP$ils!J (s CA0 ,7' SCRA %))'.
Refectionary Cre(it
6ndebtedness incurred in the repair or
reconstruction of something previously made,
such repair or reconstruction being made
necessary by the deterioration or destruction of
the thing as it formerly eisted.
ORDER O6 PRE6ERENCE O6 CREDITS
Arts. 22(1 and 22(2, )ointly with Arts. 22(8 to
22(% establish a t8oGtier order of preference*
1. 0irst tier includes taes, duties and fees due
on specific movable or immovable property"
2. Secon tier all other special preferred $non-
ta' credits shall be satisfied pro-rata, out of
any residual value of the specific property to
which such credits relate.
NOTES:
The pro-rata rule does not apply to credits
annotated in the 0egistry of 2roperty by virtue
of a )udicial
order, by attachments and eecutions, which
are preferred as to >later credits?. 6n satisfying
several credits annotated by attachments or
eecutions, the rule is still preference according
to the priority of the credits in the order of
time.
6n order to ma!e the pro rating provided in Art
22(% fully effective, the preferred creditors
enumerated in +os. 2 to 1( of Art 22(2 must
necessarily be convened, and the import of their
claims ascertained. There must be first some
proceeding where the claims of all the preferred
creditors may be bindingly ad)udicated, e.g.
insolvency, settlement of decedent<s estate, or
other li#uidation proceedings ecept where
there are not more than one creditor.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+
San Beda College of Law
2$8
MEMORY AID IN CIVIL LAW
,redits which do not en)oy any preference with
respect to specific property because they are not
among those mentioned in Arts. 22(1 and 22(2 and
those while included in said articles are unpaid
because the value of the property to which the
preference refers is less than the preferred credit
or credits, shall be satisfied in the order
established in Art. 22(( with reference to other
real andCor personal property.
,ommon credits or those which do not fall under
Arts. 22(1, 22(2, and 22(( do not en)oy any
preference and shall be paid pro rata regardless of
dates.
CIVIL LAW COMMITTEE
CHAIRPERSON: Romuald Padilla ASST.CHAIRPERSON : Vida Bocar, Joyce Vidad EDP : Alnaia Ha!!iman, Doro"#y $ayon
S%BJECT HEADS: C#ri!"o&#er Rey 'ara!i(an )Per!on! and *amily Rela"ion!+, Ale,andro Ca!a-ar)Pro&er"y+, 'a. R#odora
*errer).ill! and Succe!!ion+, Ian Dominic Pua)O-li(a"ion! and Con"rac"!+, S#a Eli,a# Dumama)Sale! and /ea!e+, Jo#n S"e&#en
0uiam-ao)PAT+, C#ri!"o&#er Ca-i(ao)Credi" Tran!ac"ion!+, /i(aya Ali&ao)Tor"! and Dama(e!+, An"#ony Pur(anan)/TD+,
'a. Rica!ion Tu(adi )Con1ic"! o2 /a3+