. . .

C.REDIT-·TRANSACTION·s
·' · SAN BEDA LAW CENTRAuzio BAR OPERAi10Ns- MEMORY AID·2019 '
,sz®' •4au,r::a"#.{mt:'. ±scr2MR&*'@:; :ou,: MA#&&tsv1NIBPt:·1t•n• s°tiffsct,fRSAkwiW;:e@;J:S:amcw s;;e;nn:ul;;;"i i!
.. .
, 2." By operation of Jaw (Id at. .. 4).· ·

l GENERAL PRINCIPLES

Cr1:.<N Transactions: , . . .
. ·,

Parties in Bailrnent:
1. Bailor. (Comodatario) · - _delivers the possession
or custody of the thing bailed; and · · · ·
- Contracts· 'of security that. include .. all ttansactions 2. · ·Bafiee (Comddante) ....: receives the custody or
:involving 'the-purchase or loanof qoods.jservices, or . possession of ihe·ih'in_g thus deliyered·(/d. at 4).
. money .with a
promise to. payor deliver in the future ...
. (Q,E LEON, .. Comments _.:BIJd.'. _ec1ses. _:oh Credit .
· Ttensections,
. .
(2016); p. 1 ). {her.einafter,
. .
DE
~ LEON]};·
. .

~56. for, the"' Cqmp:arative_ ~nalysis otel!

: . S,ee: p·ag~.
Credit· Transaction's under the CIVIL .CODE.
.... •• • :
. ·· - • ."4 :

<.

• • • • ... • l .. • • • • ( ;'1· .•"I•'-, ''. . •',.

. EXE;CUTIVE-COMMf!TEE -: , . ~UB~CT (;OM.Mln:EE -, . ... J'r1EJ'1BE~s- ._ ADVISERS·
. ly!AR,Y C°x'RIELI, .C:,SU~QUJ · fyl/1.. CRISTINA ·D: . .(illF.OYO . ELLAIN c. PEPITO, MERRYL . Dean ED VINCENTS. ALBANO,
· ,•. Over-a/I :Chai,ferson,· ERICX.' Sub]~ct . :- «<Chair, · · MARY· KRISJl,E ·. M. _-FRANCIA; . Dean Ul:1'1AN9 P. S~N_!O
MAE C: VISTA Chairperson· for, ·CI-IERWYN · 'L:. .. CASTRO · .CHARMIE .. ROSE ·DYNE R. . ID, Atty. MANUEL P. CASINO;'
... Aca'de,rii~s:·; BE!-!' ... ~i·.:_-E.' '.(\~sistani's_;,bjectG;hair,JAY,SON ,:"RoMAN'9, · · .· · .' Atty.·DANTE.·o. DELA.CRl.JZ,
· BARBERO Chairperson for Hotel :...,p_ HIQUIANA Subject Electronic 'JANINE CAMELLE T, GAS.CON, Atty. ROWELL, .D. IL.AGAN,
... _Qperatioris,]1-IELSEALOUISE"B .. Da.ta Processing, . MA.. 'CI-IE)UE MARIA.
)ANE- .'.G. Atty. JOSEPH-FERDIN.ANJ;) M.
. · DIMAANO. Vice, Chairperson for ,, ANGELICA 'R LOVERIA .. LABANGCO; M.AIµELA MAE B;. ', _DECHAVEZ, Atty .. 'I_BERESA
· . Se~r~tariat,. EARL'.· JU~ M-'Co,njlict . of ··La">!'s,:. SOPHIA 'M.AMARit,JEMMA Z. OYAµS,: GENEVIEVE NUEVE:cq, -:.-
. ·· YAMB~Q: Vice. Chairperson [oi . YiCTORµ\ E.. MINA"Persons and BENISE D. '. MADAMBA, ·•
Operations, MA.' AN<JELIC:A)3. ·. Family :_;-]}elations,; °JOANNA DO~,(\ -_K19s."· B;~_GOMEZ, .
. DE· ~ON ~ic~ Chairperson Joi- _ELIZABETH KAMI.A_ -, _c_. . }ASO!q ]EREMIAl-~ -G; RqNES; _
Finance, ARRJ\_ -O~Y~. ']. _wµ_CONTENTO 'Property ·qnd GE~ CEASAR S: BAGUIO,·
BADANGAN Vice Chairperson .Land 'Titles and Deeds, KEVIN CAMiLLE C .. CELZO, MORIUS
:forAµait,]ORDANN.CHAVEZ . CHRISTIAN· : .A.'- PASION .:MEDEL. F .. SOLANO, JOSE .
. Vice Chairp;rson ]or EDP, HANZ . 'Succession, JAMIL P." DALIDIG MAURICE . " - ROMEO .,.: v.: .
. DARRYL .. P: . nu:.·-. Vice".·. ObJiga(iof!S .. and ~.Gontracts,, _SALVAyION, ·LOIS RENEE ·R._
Chairperson forLogistics, and . · ·. KEIR:JIN ANT.HO~ B. VIADQ ·- TUBON, C·ZESKA JOHANN G .
. ~OHN ,:u.FREI)' E. 'AQlfilIZAN Sales and Lease, KORINA CES M, CO, . JEANNE. PAULINE · F .
. Vice Chairperson forMembership. CUEVkPartnership and Agency, RESURRECCION, MARIA
MARIA ·ANA ANGELA T. EMILIA A. SIBAL, .]ERRIC. B.
· . S!MP AO Credii Transactions, CRISTOBAL
. GIZELLE KARINA , D.C.
MO_NTERO Torts andDamages
 CRE'DIT TRANSACTION.S·
~AN-BEDA LA~ CENTRA~IZED BAR OPERATIONS -, MEMORY iltD 2019

LOAN (ARTS. 19·33-196~l· I·

Confra~t ·bf Loan
A contract wherein· one. of me·
parties. delivers· to
another, either something not consumable so that ../
the latter may use the same for a certain time" and
return it, in which case [t is· .called comrnodaturn: or
money, or 'other consumable things, upon . the
condition that the s.ame amount ofthe same kind and
. quality shall be paid, in-which.case it is simply called
a [can or mutuum (CIVIL CODE, Art.-1933).
•\

, The contract _o.f loan ls.qoverned by the rules as to ..

-' the requisites and val)dity of contracts in general (DE.
L!=O.N, supra. at 9/. · ·. . , . ·\. ·

. .• ~ ··~ •':" . . .;, ~·· ... _ .-; . . .

Generally ': gratuitous ·-' .
al.tt'fou-gliJt.may.also.be
onerous 'for :t~ere iJ,iay
be stiRylatioi{of interest.

»» •.

. . . :. ...

..
/''

640 ~019 SAN BEDA LAW CENTRA.LIZED BAR OPERATIONS

·'·
 . . rl S¥55M
. 45

CREDIT· T"RAN SACTI.O NS

SAN BEDA fAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019 . .
· rais#h · f*M ... t.J: -..~£&,: ·k4i·h I:~ Wh14\%14thil-%i5Wr#:a·,Fit ,; .. :»W&@:*%43@$§·;ffi 84?§'5-tU#i§#RSJ@f:&;·Wf'Z.\•$[![, r

Loan v. Credit
. C.OMMODAJ'UM.
(ARTS: •. 1935-1952)
Corttract' · .for .:- ,.th~ Ability· of a person to borrow -
of' <.·· -
./

delivery by one party. money or things by virtue :_Nature·.- ..

and .receipt of other the . trust or confidence
party· of given sum a reposed. by the lender so
"General Rule: Bailee acq!,Jires th~ teQ1porary use of
the thing bufnofits frui_tssince th~ bailor.remains the ·
of money," or :'9th-er that tie Will pay what he may'
owner (CIVIL·CODE; Art. 1935). . : . . '
.consumable things promise within ·a· specified : ,; ... f: . ....... :.;. . .
upon · aqreernent, 'period (DE ·_LEON, supr.a -et
\ Rationale: The: right"to :use··a thihg· is .gis~_irict from ' 0

e~press or· implied, 10).'

· the righ_t to enjoy the frui~s (DE LEON, ·supr~ at 28). :
. to r~p;:,.iy the. jar:ie . : ,-: · -. . .. . . ,,. The· fruits pe_rtai.n to _the oymer of the thir:ig· prbducin,g.
. amount of. the· same . The con_ces~1o_n of "credit · ..
th·e fruits'(91VIL CODE, A'rt.-·441)".'•'' · -: ·. ~' .. :
· kind and g-u~lrry: ~l_!,h ..n~c;~,~S~fily;, _ ·.inv~,l~es ~ the .• . •.•• ·•• ,• ·:\ •. ": ••. ,.;'.• ! .• · -:·: '•\ •' • • ; ~. •. '· • ·,
· . or wlthout: interest granting of· loans up to the
Exce.ption: When·there is a stip't.ilatiorrto make use ) :
. .·(CIVIL.. GODE,.'.Art. lirnit-oh_he .am·qµrit f)_x~d in
,/ 1_933), "'.' ·, . · . •; · ."• · "the of the'.'fr0it':(~t ·the.'thiog loarie1:HCl'IIL ~COQE, '-Art:
. . . . . . •, "credit"
• . • (Id.
.I
at 10).
•
. 1940). Proy}ded, tha~ ihe use of the ."f~uits is merely
•... "incidental; .otherwise, iU;;, usun~ct (PE ~EO!'J, supra,
• • '..·. '1 ,.. • ••·•• • ,, •
' Credit in· Relation to-Debt. ' . . af-28).
~ . - 'Credit is a sum credited on.the books of a company
t~· a· person who appears to be. entitled. to )t. It
·. ·~ 1:. ~·~. . . ·.·. . .· .:_ . . ·.,· _:.· . . . . ·. ....
Nofe: ·Such. stipulationJo·enjoy the.fruits cannot be
presupposes a creditor-debtor relationship, and m~~ presumed (.{d.' a(ZBf ·.· . i . ..' ... . . :: ' .
be sai9,·,tojmply. ability; ~by .reasoru of prope~Y, or i • . • ,• \ • I ~ • ,..~· :·, •

estates, to. make a

promised. payment (Chinatrust·
. (Phiis.) Cominercie; Bank v. Turner; No .. _"3,:!·
..
1.91"4[58, .July 3, 201:7)\ · , ·~
. -.- .. , · .. ·
:. .
. .. -
r r; · :Ji
. . · .: Loan v. Di~counting_pf Pape,r
.. ·. , •.·~. ~·· i~!.· ·:·~· ·i ~ \:{:·;. ·-1~\.n;~;'·~:.,:· •• ·. -~.... ; · ~ '"(
-:<..

. . . .
. eontract· Ak_in,.to.-Qonation. . .. , ·::...-_.. ; _ _- . : ..
Both confracts bf, corrlmodalum and 'dciti"atioi:Jcorifer
bene.fit· to. the· re~iRie'nt.~The_:presumpti_ori· is that the.
I:•
': .
bailer nc;1s : loa.ried _the "thing hav_in'g . no c neea ·for.
. therefore (DE· LEON, · supra at 2.1}. The ·c~H.i~e: o.r
.Less-, -expensive than ·' More . '·exp~n§ive . than · . cohsideratiori°'for .b'ot/1Js pure lib~h,ility,(CIVIC90QE, · .
• • • •. . ).. •' • • - •• .,. ., J· : .. , •. ~ • •
discounting:;.·, . · .. .:, obtaining'· 1oan · because. • Art. 1_350):,· · . · ·· · ,. . ·
• • • • v, • • • / interest." is. calculated on . . ' . , :;, . ,..· .,·.··. ...... ·.. ·
I •. ··~, ~ •: .J •• • •• • •: • :'•:. • :·. • • > ~· • ; • •. "'~ .. •

..,.:. '0 ••. ; ' .. : , . .: • : the· cim~u~t; loaned and. • :

, ~;-:· . ' . / ..-:
Characteristics of Corilmodatum:, (RPG.P).. · ·. . .
... : _· ... :, ·.... ·.,::-,,-not orr- the .: ·amount 1'. Ri=m1-..::perfected b.y cleliV~fY;· .- ····'. '.,' .· ., .... _,_ .
:''
·, . ·. · .. ~- . {.'~
. :- . ·act~~liy..rec~ived:
;.·
:. . . . .. . 2. Eri.ncipal ~ i~_~a~ ~!ancfa!q~ne by itse1r;· · . · .
3. Gratuifous :,_ thEf 'Cause-- of wnich· fa'": the. m·ere ·
' ; ~ -~,:,r di;: [itierali_ty. pf.: t.t1e. ib,er:ief_aetor,;.(~/VIL Art. : ,pqq.t.
lJS_Q); :~me(;.".' ,_ ., ·:. . · ,, . ' . · ·.: .. -:'"' . , : · . . '/. ·;·
\6-i~ays ... ~n··.a ··aoul51e".";'Aiwayf,· on;.~·~ihgle "name 4. Per~fonal · in Natt.ire ._ because. of the, trust (5
name paper _.(one on paper. (one on which no . PARAS, Civicbde··ot tfi_e. Phifipp.ir,es An~otat~d
· . · · . - ·. 'wbi~h two. signatures- -6ther indorse~r1ent," ot~e·r . '·.{2016); [~ere_1nafte,:_5P/!.:RA${ ·:. .<_. p.' 889)
. :appear yJith. . both than the·, signature, of·the ·.
•
.
•
·, •... t "· . :·' '
.
,.
.i
. • ·~
•
' '
~
• . .
'
•
•.
; ..: ..

. parties .. liabl~ .,.":for .ma~~r appews.',.. . Ki~ds.'of Corymoda".tum:. ,:·· /,. . . .·_:_.: · ,:_ . , '.. . .
. payment). ·. . : . .
. '1 :. Q_rdinar,Y. 9of!1m_od~tu,rn-·-u.se_ otthe. t~ing bY:.tn'e .
. bail~e· is> fo.r··a ~~rt~in.Ji·e_i:iod-· .. of-. time· . (C,VIL
...
·· · 'copE; Ar:t: ·19~3).; : \... ·. ·. · . .- . .. ··•·
Loan . rt,ust
:
be . pa.id Th~. discount does. not . i.. Piecarium· ~ :one·· whereoy · the· bailo.r 'may."·
back: . . .· >: ·.· ha\,'.e- .. to, . be .. repaid: . ,.demand the thing -loaned at will.
· (Herrera · Pelrbphil v: A cmntr~ct is.pf'ec_a'rium-:when·: .
Corp.,. G.R. No: L-48349, · a> The duration a_nd·purpose_'of the contract are ;
f!icember.2£1, 1986~. not stipulated; or ·
(DE LEON, supra.at 11-12).

2019 SAN. BEDA LA w CENTRALIZED BAR OPERATIONS 1· 641 ·,

 . - .

CREDJT TRANSACT.I.ONS-
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMoqv AiD 201!) .
UP&Sk ::ktftitMihb#b ev R 5 4 · #,Mf Phi!M% *!3'Mh.lfy# Wtrj&PW# ?N.4iW $£i$S ?iri?ffftw!(iiMiS SU3:2#bW#{&!@G# b*-iti
. -·
b. The-use of the thing is merely tolerated-by
. - _ihe ?wner (CIVIL COO~, Art. 1947).
Baiiee- _;acquires· .a In. usufruct,. th·e
Cause. mer~)ise of ;the thing, . usufructLJ_ar'y acquires tne·
The cause is · the liberality of the bailor .. - put acquires no -rights -~ight over the fruits.
Commodatum is· essenti.;1lly . gratu_itous (<:;iVIL. over the fruits thereof . . .
CODE, Art; 1933). in . ttie absence.' of
. '
-StiP.uiatiop: 'to _-, :that
In . Pajuyo v. CA, the contract · was 11ot . a effect.
commodatum because the ·bailee was <?bligated to . , ..
maintain the property in good con{lition (G.R. No .. (DE LEON; ·supra at 22-,29).
146364, June 3, 2004).
Bailor need not be the owner of the .thing -loaned
Note: l_f any compensation is to be paid by th·e (CIVIL:.¢OP.f,_Art. 19:18) • ·. -: _ .: ·· ...
borrower, there arises a
lease contract; and if the lt is suff~~ie:ntJh-at th~ b_?!lpr, has:': · , ·
conslderation is td render some service, an 1. Possessory injerest: or .
innornlnate contract w·ill result (DE LEON, supra· at 2.· The bailer. has the: rig hf to allow-the use. of the ..
18). - ·1 • thing_ by 'th~ bailee (e.i].' lessee, us_ufructuary)

u
•

·· . ·. . -~~ J:.E_O/'j., SIJpr~_at 19).: .·. ,

D,elivery of_the thi~g is a condition sine q~on !or ~--! 'r_.~~ .. - . . -~- ·
the pertection of the contract, An accep,tecl pr~se -.1r eas·oh:); Gommodatur:n does · not .contemplate .
to_.deliver ~orh_ething, but not yet ~oll~ed'.'\?Td_~very,'*'.: , '.:;tr~s!1lr. gf-g.wners_hip. . ~ - .. . .
w.111 c_onst,tute B . contract'. to: lo~Pj(l?ut 't-VW_tll no.t : - ·· · V . : . _- . . . : , .· .· . .. . ,

.· . · •
constitute a. contract of co~modatumv.~· 7J.-

subject Matter · . · . · ""v'. . .

· f:.ch . a(.i·,,:'
. :~~?- -1;ffec~s:. o, Uie"t.Rnnc.tp~~, th?t: Co~mod__ at~m. is
·itil· T ·6.J¢1Y. e_r-sbl}.~I fJ){IL ~ODE,-Art-;1939)_·· .. _. ·
lf' .b-Wl · -, J · · · 1 .- · ,\. ·,-·
J -~f",
. ·r~ .,
. .General . Ru1e:. Non-consur,r_ able 9ood~ whether k~ .-Not~: 1_93~- eo)i.
- stitutes an exception" to the
movable or .immovcible .- ;, i-
prope~(@,',/_IL CODF.""'Ar{r'1_ ge. nera:J':l\e · u~~\ticlf!.... 1) 78_ .. that all rights .
. ~936-1937)._.'. ·. . . -~.r lMrrn-1(fiJE
-?18?1re1.i~~virt~_f ?f__art~II.:atio~:are
1.. . _ . . ; . .
~ran·s-~i~sibl:
, ., , .

. ;:~:~r~~;~iiil~~u~ J,~~,0\4~f1b~~b1
a.~,~\
is ·!1ot"the con~~r:ription
:~f
.

1
: ~- ..

_o_fJ~-:object.
. , , ,•,1

7;-r /JI·!'""~i~ i~_:

it i ,,;: . }~;
LE@N, supl)at :?7

e. ,i:Ji~~es_·
er _t~e\~i.l~_t.: .or:·
!~? ~ontra~t _(Cl~IL ._CODE,_
~ht ~ail_~~
Art.

-. ~,:;;;~~.;;;;;;j:~~~;:1;~ ~i&
~~;~0~~.2'~·boh:,~~s:;~aiatl6n,h~ithe'· 0
le~d c_qnsuinable· goo·d,s' ai,d to _hay~thef~saf!le•: ·_ . -. '---,,""coJi~<!fl?_tum·
·. goods retumed at the end.of the peri~d c3.g~9,J?qn;
_i~ tran~mitt~9 ·Jo tn~- h~i.r~ ·of - ·
M.· ,\~
~)Jit~1pr or. both:P?rlies (CIVIL <;;ODE,· ·Art:
th~ loan · is. commodatum- and .. not · mu-fu~~ · NI _t'\..>- ~06); ahd ·... · : ., · · ·. ,
.(Pr0d_u_cers: Bank ·of. i{ie. Phi/s., 11:. cA: '.G.R:~·,··lfitiere:ar-e two-9r,rn"qre borrow~r~,Jhe death .
·115324,_February"f~; 2003). - '·: '! '· • ~ :qf-one,.do~~- c
npt"e;tiriguist:i."th"e qonfracdrf· . . . ·-
· . , , ., ... · · ·. · JhEi· a6sence· ..·cif,~tipula_tion - .tc:Hhe, contrary.·
Com.~odatum v. o'th~r Type of C,ontrac~;:; . - . ·: _. ·. "(D~ i...Eof.!,-supra ~t 28).· _· . .-. __ . :· ' · · · ·

.. - . . . . . . ·• : · :- . ~:-:.. The.bai;e_e;.tah -~e·i~h~-r 1e:nd-notJ~~~if~-~-obj~ct :

· -·- a_
. ··_o:f the t::pntr.;1<;:l fo .third'· p~rson (CIVIL C"qDE, ·.
--~rlnclp~I · purpbs~ .is i"nji°e~ci~it,' the.'.\,r.incipaf .. Art. 1939, Par. ~J:- . . . . ·. - . , · ·.
:the "gratlii_tous a'i:,d purpose· . is, ....... - the: :_ . . . _. .. ': . '
temporary us~ of ttje· safekeepii:,g. ~f-the.thing.. . . . '.. Exceptions: . -.. ·.·
thing byJ,he borrower. : . a .. Llnderstanding or agreement fo !tie
. • • • : • •• ' J "-;- - contrary; ~r:id : . . . . ·: . . ..
b. ·,Members.of the·hm.isehold."may make use.of
· , u,-~·thi_ng ,lo~n-ed'..(OE ~E_.QN, sopra at:28).":
~s_sentially _gratuit~us ·.: :i"r,~le~se;~it is. al~a;i-_.for a
price. , . R~asQn: ·They· are: ri_ot- consi'dered thi'rd pers9ns
• \o,
((~: a(?8). ,

·. 642 1. 20i9SAN. SEDA LAW CENTRALIZED

- BAR OP~RA
. .
TtGNS
.
: '
..
 CREDIT TRANSACTlpNS .
. . ~AN B.EDALAW CENTRALIZEDB_AR OPEf!ATIOf',,15- MEMORY AID 2019

Exceptions-to. the exc,eption in (b): : · · 1;:xception: The.bailor who, knox','ihg.the fl~ws of

a. If there is a contrary stipulation;,and . : the thing loaned, does r:iot.' advise the bailee of ·
b:· If the nah,rre of the thing for.bids such us$ (fd.. the same,. shall be· liable to the latter for. the
a.t ?BJ... . . . damages which ·he may.sµffer by reason thereof·
(CIVIL CCJOE_, Art. 1951). . .
Obligations of The Bailee·
Princjpal Obli_gati.ons:, (TUP~R). . The bailee·cc1nnot lawfuliy sell t~e thing.I~ satisfy
1. ·Take earl:! of th'El thing .with di.ligence ·of a good · the damages (DE . . LEON,·$upra at 37).. .
· father of a 'family. (CIVIL [;'CJDE, Art,. 1163);: .
· The mere failure. 'of the , baii°e.e. to ,.re~urn·. ttie·
Re~s£n: . ~h~- bail.~_e_ i~ _suppo~ed,.tP r~furq:·th~. ·~ubject ·matter of com~od~tum tp tpe. bailo'r
idirntical thing .(CIVIL' _CODE, Art. 1933). . . .. does hot constitute advers'e 'possessiorl',on the'
p9rj of the bailee who h¢1ds the·sam~ iri {rl!st (Id.
2. · !,!se the thing loa_ned .. only for .the.,·purp_ose for at 36) .. - · . ·· ' . · - . · · ·.
. · WhictJ i.t was .lo'aned. and 'for no ·othe·r purpose .
(CiVJL. ·CODE,.· .. A..rts:'-1935, · · 1939;. 1940):
Inthe case ~f CattioliC ·Vica·i:Apost6_/i.c;,of the Mt.
Othe.rwise,- he will com.mit'a breach .of contra.ct
(DE_ LEON, supra.
at 31), . ,. . .
Y·
Province 'CA, the. petitioner was fri possession .
.' of. ·the . disputed. . property -as ., borrower i in .
. com rnodaturn from private, "respondents . since
. . 3. .e_ay. 'ordiiiary expen~e~ ·~ for' the use ·a~d
· 1906 but.in 195·1 petitioner repudiated the trust .
- preservation of.· tli'e. thing and · a portion of
e·xtraordmary expenses ari~1ng tronfthe·actuaC · · '_.wben 'it oeclaredthe jiroperty for.' tax purposes
under its narne. Tfi.e Supreme Q~urt held that .
. use Qf the thing"(C/V/L CODE,· Arts.1941, 1943,
when it fi\ed its, appticatlon fo~je~[si~.ation· of the,·
1945'. .1 $49, .. 1950);. .· . ~
r- .......... ~·said p'rQP,erty in 19'q2, petitioner' .had. been ')n
adverse·-tosses·siori of-the. same forat least 10
. ---=years.. t.Jnqe( Par.. 4, Art.-
_555, of.tb~ Civil Code, it

i· :
: :- . CODE, Art. 19~3; DELfON, supra at ~2). ·. . is clear Jtla -~he ~eal,'.right,/ofpossessi?n o(?a~lor ·
. ·. ' . -. -. · · . over the r:iro~erty wc1s 'lost' or. no longer· existing
Lial;>ili!y·f~~-Extra(!idi11ary-~xp~s.es _.. · .. _ afterti!e 1ppse of 10 years.that ballee hadbeen ·
If extraord1~ary expense~. ~~~011,_thei~c.cas1on . .. . ., .' in. ~r;_e.er~e. Pf~ession 'thereof (Cat~olic. vicer
of the actual use of the. thing~ th~)b~e~. ·~veR\: Apo,ptotidrJ.f .tne Mt. Province v. _CA, G.R. No.
: thouqrr .he a~t~d .without" faul.t.::th~ shall ·be. . . '·bo294='95";&arcfi'j23,.. 1990). - · -. . · · . · .
. borne equally by· both ttie l?ail~·ncl bai,Lee, · .. .. · · · .' . ·.. · · .. .\ ·' . . ·
.· unl.ess there'. is. ~ ·stipulation. ~e. c;;onl~9jY . . Other__Obli~atio~s: '(LPE)."'' · .. · . . · · ,
.(CIVIL CODE, (',rt._ 1949, Par. 2); · ·' :E Liabilityfor toss _due to fortuitous event'(PV/L
. . 6<f>DE, Art. 1942); . . . _.., .
~.....,.....,;:-.,...:,Ger:ieraf-· ·Rule~·· -He . is .. ~ot .Iiable -because
.. ownersh_ip .,r~main$ with. t~e b.ailo{ (P!= LEON~
. ~upra a(-34). . . . . .:· . . - ·. : -. · . ·.
4. ·Beturn · an<;t not'".to>ret.9nCtne· ..ic!~ntic;al :thing : :. . ·. . . ··, · ..... ,.-· . . . ·.' . ... . . . · .. - . "., . . (
. 1.o:a:ne9 · exce_pt unctef - ¢ertaf!:J, 'cirturri~~ahces · Exceptjons; ·He is liable forJos~ 'eyen if it ~tioulcl
.(CIVIL CODE, Arts.1933,- :19M,. 1946; DE· . be· through . a fortuitous ·e.venf in' )he fciilowing r.
LEON, sµpfa:at-30); :_ · .-. ·: ... : .-~·:···'· ·' · . . '.casJs '(CIVIL CP[)f=, A',i 1942J;''l~LAS•O( . .
. a, ' l/l{hen' ~e· _!See_ps it.19,nge( than·· the:· period :··
~ight'of R~.t~n.tion ... ·. stipulated, 9r after t~e a.~complishf"!'l,ent of its
•' I • • •' • • • ·•, o ... •
. ·General Rule:- ~a11e,e has no· right to retain. the . ·.~:'e _ ;__ :_,. ·._. ... . . ..
thing. Joaned as'secutity or. the ground that the . ,.- .... ~. .
bailor owes him something/even .\h9ugh,:ifmay , Re~so_ri:. Delay (CIVIL CODE, A'rts. 1165, ·
_be -.by. r~asqn of exp·~ryses. (CIVIL, CODE,. Art. ;.· :·116f\~~C!,/1ZW- . . . . ·.::'··'
1944).. · :: . · __ :.," ', : .. :: · .. · . '.:· .'. ·:. · ..
b~ · When he.,bends or
leases ifto third p~rs.ohs · ~
.~~asons;~·· ... · /.· · :: ·i:. who _are not.membetS:Of _hl_s household; .: ;
:: -;-: .• ·:. _; __ · ·- . . ,,_.. : '
· a •. Owner$hip remains in the bajlor; ar:id . · . .
bnly=
t> .. teinpora_ry use is giyen :to .the pailee .ReaSO!"!: ,{;Of!!m.odatun/ ii;'pJr~ly 'personal·.
· : (DE LEON, supra at 3.6). (CIVIL GODE, Art,,1,9~9).. ' ·. . .
. ., . •.. .. . ' . . . ' ' ·.. . ·,:. - . .
·, Cqmperisati6rt shall-n~t b.e prop~r when on.e· of· ··c:-· Whe-n'.Jhe~thing loaned tias bee1i' deli"'.ered · ·
th~ d~bts arfses' fr0m ~i'. depdsiti.rm or from the . with Apprai$aLof its value ·unless ttiere is a.
obligations. of 'a d~positary .. or a bailee in 'stipulati.on .. exemi>ting . 'the' .. bailee : from .
cominodatum ·((?!VIL (?ODE, Art. 1287). . . responsibility in case of fortuitous event.

· ·2oi9 SAN BEDA LAW CENTRALIZED SAR OPERATIONS ·I 643

 CR.ED-tT·TRAN·SACTIO·NS·
•. ,I' • •• ... • • • ,·

SANB£DA L:AW CENTRALIZED BAR OPERATIONS - _MEM9RY AID 2(_}!9

~lid' c·&f%!Wf:&4¢i4W •. ;v z;,,. ?§{ t• ? ;egg© !SCA~P#ifit?-:'544\#91" AA,. >5,'iWBP i ;e;::l§,#· 44WW!&:l¥\MffiE&JfM#!iiii
. .. .. :· .
.Reason: The law presumes that the. parties General Rule:- He· cannot demand return before
:'. intended.that.the borrower shall be llable.Ioz · expiration of ·the .period or .accomplishment of -
the. loss of the' thing· even if it is due to a the use (CIVIL:. CODE, Art.' 1946).
fortuitous event for otherwise, they would
ncit have appratsed the t~ing (DE LEON, . Exceptions: . . · · .
supra at 35). a: In case of urgenfnee,d.ot-'the thing, he may
demand its return or-temporary use (CIVIL
CODE, Aif "f946l;· and ' .

Reason: . Cor;rmoc(atum · · is ~s~e1:1ti.ally

..gratuitous (PE LEON, supr« at 18). · . ·
. ·.. ~ .. ~ ';. . . ' ·. . . ' . ~ . . '. ,'; ..
Effect: I( for a temporary use, the contract
'of. commod~tum, is": suspeJ:i.d:e·d • while" the
lhjng f_s in th~-.p9ssessiofr of the bailer (CIVIL
CODE, Art. ·1946),_ . . . . :: .

. . .,·: ,.·,· .. .. . ·.·

.... '
 -.· .· CllEDIT.,-TRANSACTIONS
SAN BEDA LAW CENTRALiZED BAR OPERATIONS-=, MEMORY AID 2019
tt M-?fM~«·m,;_. MUp ~&&ki.&£ ;: 1 m-;w::. e:sinf.·:. . * ,W. ~1.,. :'*»Mw:~rym ,f ..nAtu :.. k.. Y "="""""=
a,: t@Mre. 6¥G·i-tM4NttH21Tfu,',..
)

E;:xception: If the extraordinary expenses arise

on the occasion ofthe actual-use of the !.hing by MUTUUM··
the. bailee, even though he acted without fault, (A.JiTs_
.
/. i953~19·. 55)'
.
they· shall be borne equally by both the. bailor
:a.nd .the.bailee.(C/V/L COD{=, Art.1949; Par. 2}:
.Contract ofMutuum .
Exception to . the Exception: Stipulation A bilateral -contract whereby one · of . the · parties
providing for- a · different. 'apportlcrirnent 'of delivers' to another money or other consumable thi11g
. expenses, 9r those expenses shall be b'orri~· by with the-understanding that the same amount, of the
·. ·- ·~·tne bailee or baileronly (D_E LEO~,:~u~rf) ·af45).. same 'kind and quality.rshall be paid {CIVIL CODE,
Art ·1~3.3)._(: ·, . .
. Notice i"s required because it is possible tha·t the .
. bailor'rnay not want "to incur. the· extraordinary . ·ii i~v.;li!es the return bf the equivalent amount only
.expenses .. An exceptionlies where theyare so : and not 'the: id~~ticaf' thin'g because ·the borrower
acquires ', ownership of. · the money or· .other
. t.frg~nt that thereplyto the 'notiflC?ti.611 C?nhot. be·
consumable 'thir;ig_ !baned. J~is qblig_a_tion "to. pay"
·. · awaited
.
withot:i°t"d~r;igei-
: ~.. .. . . . -.
(Id~ a_(4.4t.
... .
' ·. .
~. \
.:» . mJ;1Y:in.clu1de the accessory obligatio_n topay interest

. . ' . If th~·- baiieehs at f~ult, he. alone should.'. ~~Y-. .. (~E L,EON, supre at 48). .
~
:
0

.
. ~ ... ~ ~ .·• . ::~ . , ~.
• : • ' ' , ~l • ' ") , ' • ' I • • ·,

.. ... : .... . ,. . : . ·. SubjectMatter: Consumable or fungible goods

3. '. Be _biable to Ihe bailee, for darnaqes for known
· . hidden-flaws (C,JVIL CODE_, ~rt, /95!), ..... . Fungible.~nd Nqn--Fun~ible: . . . c :
; • ' • ,_, I •' ,· • '

· 1 .. · Fungible· -~,~elongs to a common -genus whic.h

.· ~c_i~_ge;,5_ ~e·v~;al species oJ-the-same kind (e.g .
. a·. gram, wme, 01D (Id. at 58). · · .
b. No'fl-fungibl_e - .specificatly determined. and
c. . : ~annot,p~ 'substitµJed by others (e.g1 specific. ,
d. . land,.building,'.par.ticular nousev-: r :·· ...•• · •·

. · .,:W.~;f'~·~1
a.'.th*g .is ~~nsu~~ble~~/n~~-d~-p-end~,-~PoQ. ·
its natur.e··and.wheth:~r it is fu.ngible cir not.depends
upon the intention oftlif parties (Id: at'58-5.9i : .
. . .· : . ' . .··
..... ~ . .·. ·, . . _),· -~~

The lo~s 'pf_ t.he thing loan eel. does not exti,ngufsh
· 6''5e·s·.-· 9.~ligatiori . t_o'· pay ;,(urjl_ess it is "·stipl.jlated)'°
·becaus"e his. obligation.· is. not tb :rett.frn the thing· .
-----,1oaned but to· pay a. generic,thing:. Genus nunqua,in
.,oe(if'(Ge·neric'tniiig ne.~er peristi~s}(ld.:at.59):· .. ,.- ...
. ' ....; . -
, t
If the defect is. ~ot known to the' bai.ior,' fie ,~· nof ·. - .:·. N~t~::. If the-bqrrowe.r· loses. the money or ihe ·goods,
·," Hab·I~ bec~ui;.e coinm_od,at~ifi-is" gr~tuitous.'(ld. at- tt:iis doesThiS.·IS.
ndt affect, ·his ·.obligation t.o. reP.aY. Jhe
0

. ·, •', 47) ... " . .-.. ·. . ·. ;._ • . . . .,·:,. ,. • I 'c'redilor. in aC.COrdance With the rt.ile· Of°reS
pe;it d[!mino (fd. ~t ~2). .
• 1· •

.·· .. No.-Right- ofAbandqnrnenf · ... · : ;, .

·. t-h~~· bailor -~cannot exempt .himself fr.om the- Illustration:
.. payrri.ent : ·or: . ~xpenses· ·. 'or . dam.ag'e·s .. by. . : ~orrower x
placed· his rnoney loaned inside his .
. : abanclo~irig .J.he. thin~ tq the bailee· ·(CIVIL c·c!binet The·n:ight ~fter,. rts house)ogether with the ·
C_ODE, Art~ 1§l§2). ··:: ' · · · · _nioney;,was turned into ashes .. :-:_ : , · · :

: . R;~~;'~~;.' ih~·,; expe!);~s.\ir. da_rnage~ :'~ rria·y. _·. . . Xis ~-Jttx;~~:.~\;·~-~y· i~:~ihiAg: loa~-~-d ~.;c~u~t~~
' . exc~~d tret.yalue''.of.'. t~·e-.:t_hit,g_-)i:ianed, }ind i,t . . i$ not required to'ret.urn the bills y.,itl'1 the,s·anie serial-
woulq,. iher~~ore, l;u~:unfa,ir'to allow
the.ba·i~r to •( · · riumbet{ but the'sa'm'e·'anio0nt·ofthe.l'o'an: .-. •
_, _ _.just~b.and6nthe.thi,:-ig.ins_tea~ofpayingf6rsaid . , '., .... ·· .· :.· ·.· . .. .. ..... ·
~ ·expenses _and/o'r dc:unages}D.E Lf-0/IJ/supra at N.o c.ri~·inal. liability f~rfaltu're tO'~a'y · · · : . · ~- .
·· 47). · · · ·· · ·. NQ estafa is comm[tted by a person who refuse·s to.
I pay his. debt: pe'r· ~e :J:IS the borrower effectiVely
.' .acquire~ qwnership and being .. the oyvner1. tie can
dispose of the thing borrowed ·an_d hfs act will not be
··conside~ed'misappropriat.ion thereof (Id. at 55).

·, 2bi8 SAN BEDA LAW CENTRAL.iZED BAR·.OPERA TIONS I 645 " -

 '

CRE.DJT TRANSACTIONS
SAN.SEDA LAW CENTRALIZED BAR OPERATIONS.: "f!Efy10RY AID 2019

. .
Basis: Note: If the property is "sold", but the· real-intent is
A person who receives a loari of money or any other only to give the object -as security for a debt :... as
fungible thing acquires the ownership thereof and is when the "price" is comparatively small..: there really
bound to pay the creditor an equal amount of the· is a contract of loan with an "equitable rnortqaqe"
same kind and quality (CIVIL CODE;, Art. 1953). · . (CIVIL CODE, Art. 1602, par. q).

Note:. No person shall be imprisoned for non- ..

- Barter
payment of de~t (GONST. Art. Ill, Sec. 20) .. -· A contract whereby one 'person transfers ownership
of non-fungible ·things to another with the obligation
Mutuum v. Lease - . on the part of theIatterto give things.of the same
kind, quafity and quantity (CIVIL CODE, .Art._
1954).

Commodetum/Mutuum v. Barter

Delivery of money dr Delivery of. some '·.non-

some . . consumable 'consumable . thing in
thing with.aprorttise to order that ·the other may
·(epay ·tan equivalent of use: it during a 'certain
the· same 'kind 'and period and return it to the
quality. - · former.

AIV{ays onerous, and is

actually a·_rnutual sale.

·-·

. ·,

· 2. ·(f the ~bing loaned .. is -9.)ungible, other _t~an

money, the borrower' is under. obligation- to pay
. thejerjder anoth'er:thing"of.the same kihd, quality'
. and quan:tity-'ev~n if it should change (ii value.In
case i(is'impossible todo so, the borrower shall·
Gene~ally: . · -, ·~nilat~r~i° . . . . pay its value atthe time .of the peirfectki'n :of the
. because. ·· .. only. ·. the. ·t. ' I 'd . .' · I : ·• .Ioan (CIVIL CODE, Art. '1955,_par. 2). '
borrower. . · has- . 8-:1
_I a era_ an r~c1pro~a .
· 9blig~ticms. · .: -, . .
(5 PA'RA-S,.supra at.88_5).

646 I 2019 .SAN BEDA LAW CENTRALIZED BAR.OPERATIONS

 - . ' .
CRE-OIT T.RANSACTIONS
SAN BEDA LAW CEf'!TRAUZED ·aA.ROPERArioNs - MEMORY AID 2019 ·

Sti°pulation· of a Partic~lar Interest.Rate

lNTERES.T If a partfcular rate o( inferest has been expressly
stipulated.bythe parties, that· interest, not the.leqal
(ARTS. ~95·6~·1961) ·· rate of interest, shall _be applied · (Casa. Filipiha
Development. Gorp v. · Deputy Executive Secreta_ry,
· interest may be paid- either as compensation- for· the G: R. :No. 96494; May· 28, -1992). '
I t ..,•
useof the money (monetary interest) oras damages
. (compensetory interest). Article 1956 of. the- ~Civil" If the-Interest.rate agreed ~pan by the parties a~e
. Code-refers to interest for use of money (DE LEON, found.to _be .. unconscionable, the· legal interest rate
. supra ·at (?7). . . prevailing' ·at the time.the agreement .was entered
-in\o sha] .be applied.The l!=Jgal rate.of interest, ":'hen ...
' applied as conventional Interest, shall always be the
Kindsof Interest:' ..
1. · Simple - that"which is paid for the principal at a legal· rate at the time theaqreernent wasexecuted
. -.. certain rate rbced -or stipulated by ttie partles.: · and. shall _not be}usteptib{ei""to -, shifts· in rate '(Isla. v.
2. · · .Cornpound - that 'which is lrnposed upon ' Estorga, -~-R-. No. 233974, July-2,-2()18).·: : , · ·
' ' ' ~- ·• . -· :'", ,. I' •

·. interestdue and unpaid.The accrued interest. is ::·

. · .. .addsd. to the' priricipal sum· and the ·)whole. · The. ruling jn "Eas"tein --Shipping. Lines· (G.R, No. : '
·. ·. (principal and· accrued- interest) .. is treated as a 97412,.July 12, 1994)/has now been-modified bi . ·
new principal upon whichthe interest for the next ··, · 'Banqko $entr~I ng. .Pillplnas Monetary Board
' . CircularNo. 799', Serie~· 9(201_3,':whichJ>rovid~~· .
period is calculated. (Id. e! 67). · · -. _ . ,..
' that "the rate. of interest for loan or.forbearance of
3. · Legal....: that whichthe law-directs tobe charged
in the' absence of any aqreernent as to the rate any money :. "gooc;ls or credits an a· the .r~te. allowe·d in
·_. between the parties (Id. at 68), ' judqments, intheabsence ofan express contract as.
· tp such rate· of interest, shall be 6% per annum." Said
.._cfri::uJar:_took effe~t onJuly' 1, 2013. · ·
. ··. / ..
Applyin~ ~W, .€irc~l~.f No. 799, the s_upreme G.ourt. ,
su_mmarjzea·.ir lNc!y~(_v. 'Gallery Frarryes (G:R; · No_.
-1~~~71, -,i1.i9.I.Jq~_13(40·13),.the nev(guideli.n.es··_on ·
)egal interesf.;,as{oll0ws:. ···. ·.. ;. ·· . . ... · · .· ·
1. · WhJh~ anfo_bli~ptior), regaraless.,9f its s9urce,
· .. ·.. Ji.~·7iw~tr~s,q'ua~r~con_tract~. cfelicts _ Q'r .
' quas,~de/JctsJ..,s breache.d, the·contravenor can- ·
. : be h_eld liable for damages. qnd· _the provisipns <
""'""--"'-·'under Title ~VIII on Damages.of th.e Civil-Coae. ~
gove"rri . in· . determining . !lie . 'measure· .. of
and·. ~omperisatory . interest. · Interest as·y~a~·;;..... r~co~er~ble-dafT)age~; · , -.-- '·, . :-. <. · ·
· . corripensat_ion fixed by tt,_e ·parties for tbe· use· or .. · · ·2. 'Fo_r-tne-c!vVaM:·o_U(lterest in:ttie concept of acluc!l
·· · ... · forbear.arice _of_msiney is referred .to as'mo_netary ·. . and-compehsatory.dam·ages, the_rc!te ofiritefest
.. interest,- while in~erest. that rr)"afbe i_mposed by law ' : ·:. . '.- and its .accrual is· imposed as follows~:. ·. .-·' ·.' · . '
_ . or' by courts as· "penalty for cfamages is ,referred· to as" --· . . ·a.~. For' br~i:lcti _of. obligations· consisting ,"of, loan.
· compensatory -"fhter~st ·(Hun "Hyurig Park' v. {=ung , · oj_forbear~nce:pf 1')1oney; 'interest.due .shalt..
·won' Ch9i,' G.t?: f'!_b. 2_20826,,.Maich 27; ·2019): The .. . be. tha,t stjpulated in writing. ·_Jnterest-,dG§
a
' right to :interes_t arises only "by virtue .of contract or . . - sh·a_ll ,itself earn- legal interest from.the time·fi
. "by __ virti:re of damage~. for d_gila_y. or'
failure· 1~· pay. . ·, · : is.ju_dicially d~mar:1decl'.-- ·. '.. ::· · .. . . .
':principal_. Of) whi~h·ir;iterE:st is<dem·anded ·(5 PARAS;-··. b.- · :!n ·th~·- absence .of- stiplila.tion,. the.""rate of
··supra at9Q6;-Bf}ffe1to v. Santa Marina, G.R: No. L-· . iiitere.st-stiall_b.!3 6%·per··annum:; co,mputed
1_1908, Feqruaty4;- ,19.18).. . . ,. . ·"frolTI d~fauft; :.(i.e.\ judicial _or extrajudicial
0·•
•• . . • ...,·. •. ·• · •. . . • . • _demand) ·subjec:;t- to- .the provisions .of...Art: ' -
. No inter!:!st sha_H be due u_nless it has been expressly. 1169 of°the Civil Code; . ·, , , .· -
stipul~le~ in viti_ting (CIVIL G_ODE; A._rt 1956). : . c; ,For breached ··obligati9ris' ,:iqt consisting of:·.
· . , loan or forbe~rance-_of money, interest' ori'
,:he requirement that the payment of.interest must amount. of · aamage?-' .·aw~rded ·. may be
. be expressly. stipulated. in. yjriting applie:s" onl/ td . · ir'r)p9s~d at th·e discretion:of the court at the
m_ori~t~ry_ i_nterest,. hot·to compensatory inferest (DE , rate:of 6%· per annum. N.o interest shall be
· /:..EON, supra,atlO). . . . ., . . .. . adjudged>- o~ ·· unliquidated:..·.·claims: ·_or
-.... . damages, E:!xcept when or until demand can
bei establiShl;ld with. reason~ble. .certainty.
..- ..
.

2019 SAN BEDAL:AW CENTRALIZED BAR OPl:iRATIONS I 647 ··

 i. , Where '.demand is established with Persde, -;G.R. No. 183804, September J 1;2013;
reasonable certainty, interest begins to Nacar v. Gallery_Fraines, G.R. No. 189871,
run from time claim is·made Judicially or .· August_ 13, 2013/ ·
extra judicially; · .. ·-
ii. When certainty-cannot be ' reasonable In Advocates for Truth-in L~nding; lnc., v. Bangko
established at the time· demand·
. . is -. . Seniret Moil(Jtary Board, G:R. No. 192986, January
made, interest runs from date judgment 15, 2.013, the-Supreme Court affirmed. the; authority
of · the court is ·made, at which time of the· es= . Monetary Board .("BSP--MB") to set
quantification of. vdarnaqes may be interest -rates and to issue arid enforce circulars
I
--· deemed. to have · .. been · reasonably when it· ruled that the BSP-MB may prescribe the
ascertained. The actual base for· maximum rates of interest for all loans or renewals
computation of legal. interest shall.be on theretoror the forbearance of any money, qoods or
the amourit finally adjudged. · credits,includlng those-for loans of low prlority such·
as consumer IO~flS and loans made by pawnshops,
d. When- judgment of court· awardiriqsum' of -, finance 'cornpanles and .similar credit institutions ..
money becomes final . and executory, Tlie BSP-MB is also authorized to prescribe different .
.whether the: .case talls-son.forbearance .or maximum.rates: for .different types · of 'borrowinqs.

u.
· non-torbearance-of-money.fhe rate of legal · incluEIJng deposits and- deposit- i;~bstit~tes- or loans
interest shall be-6%~per annum from such qf financial .lntermediaries, This' ruling wps· again
. , fina_lily u_ntil its_ s~tisfa_ct_ion, _ t~i1terim
period-beinq an equivalent to f~rbe~raJJ~ of
money._ . . · . /"(") !.~
z1me$, G.~. No. ~.8987'.,
. ./. {/.': . -;
=: :~·
Jffi'F-1:d. by the Suprerne Court ln Necerw. ~allery
2013)....
.,
•
·· · ·
· e: ·" Effectivity ?f- new. le'ga~~te -o iite~_est: . . In. $p_s; An?~v.. ~ilippine fJatio~-~~ Bani<: (~.R.. No.
'Judqments .that have , oeGofn~finj).-an~.-194;201, Novem'ben 27, 201·3), the issue rs whether
executory' prim' to. Jull1(}0~~sh~II; not b,~( .ir. ;~f)'otq~s shal~1 lia~(e f~r i~tere~t op a. lo.a.~ after_-1!'1e
. ?istu.rt;ied. Th.e 12% aRd _6_% per ~n~1um leg~'. ~ _._exorb1tc!n} S!IP~~~ 1nteres~ · thereon .af!~ the
.- interests shall·apply until June ~O; 013. . / A. ?,ubs~quei:i_t fortf.l9~ure of property that ~~cured
.· . . :. . · : , ·. . l->:z-1 . · . · . . · '<*,~ . , :· ~-~~1o~1we~e nu~.in 9~other case that· becal'}'le ·
Note_: The right to _re·cov~r 1_nter.e~:t:fr~ses ..o~ly __ e1l0Ji7~ .. ~, .~fi~aJ.fan'}'..execurort~ Tre.. Sup~_em~. Court !ulc:;q t~at
by -:virtue of a contra<;:t (m_on_ruary !nter~st) 3oryr ;- \CTi'JJ.W~e f_'.3.~that th~J (?t~·pfi mte_res~·was· ~~b~eque~tly
damaQe~ for _the delay or fa~~.t!j>~~~~ 1.nc1p~1--. -Zdeclar,~,al _a~~-~.1fonsc1onab~e doT.s not e_~t1tle
loan on which interest is dernandei:I (COQJP~nsa 01)'~ f_p,sa1'cra.el3'to~'. to/st9~.,.Pc!Y.me0t: of .1nte~est. Only the .
. interest)'.· R~cove~y of. .rr:onet~~y!.in~r~l0>~i{e;~& ~~{[email protected]~.~yw~~·'cJ~cl~r~d'vbid~.th~ stip~la'tion ~o
·. express , · st1pu!at10n : m • w~tmg; . r<;?cov~~of·.. • .... "-t ~~te~e?t-rel']1€Jl,!1~.-,lhe 9~~tor~-are. ~ons1de~ed. m
~om·p_ensatory''interest is su15j_ecf to g id.eJine9f!a1 : : defavJ(f~o'.llhe_d~!)6f.· fi~~Jily of the other· case _an·d ,
down .in \,~aear v._ Gallery. Fraees. (O~ia'[ef~,S~EN-r.q9~~ring th.e . time..... they:~ere -Uf)able to ·pay )he
v_atencja, G.A. No: 21358~, ~ep~f~~f':.12(20~~~~~9· l~~e fas;it w~i's. exorbi,t~nt··a.n_~ h_eric~,
. . . r ... · · ·. • ·, ,. /:9.(() ------de~I rect vdid .. . . . . ../ . . . · ·. ·. ·
F.actors. That.the.Monetary ·soa~d .Gdnsid.erl in. M'·A~ .. \Y ·;· .·· :·. -. .. . . - ·. . . :_ .
. Fixing'·!?'e _M~~imdm._Ra~e~·.o~-~:qtes):~flhte're~t.: .. _·. ~nc.~s '«_h~n lnt·~~e~~-~o~~.N.~t·l!t~gJ~.~~~~1;1n· .. ,..,..
· L · The-~1stmg eco)Jom1c cood1t10Qs·m the·countr.y- . 1. .Dunn·g Jhe. effechv1ty of the .moratorium law, '·
. .. , and·:the .generaf-requirerne~ts of; t~.e: naf_ion~J .. .i -, . v.i.b_ich-:h~s'.the.~!fec(1:iiu.~.P.~r1oin~J°~~c,9,1i~.c\(?~.
,economy; ~ . ·. ·,.,. • ,, . :- .. . · : •. :ofr payn:ient. of. the· .pt_in91gi:!I· 9bhgat19rn w!:i.it.J;i . '
2. ·.T~e sup~ly. ?taQci.de_ma.n?J~t._credJ.t . · - ~i~ri~~the 9c;c~sseiry pbliga~ion iriJ~.~ P,aym~nt '
3. The'i'ate.of.mcrease .. m·the,pn.ce-lev.els;- and·· ... · · · · . of interest; . ·,. ·.:, · .. , ·. ·, _. , , · : ·, _. ·
4-. , Sl'.Jc_h. o_the(rele\lant crit~ria .as ·the' ~o~etary '~- '"ln,.cas(.of in.soiveqc/.9f. th~ ~~·af!k;. wti.~o~· !h_e
Boaro may ad?pt (P.D. 116,_ Se9.- 6). ·· ·· ·' Bangko: S?fllr:c!l pr~hibits)Qe.--g:a~k: fro~. doing,,
· ·. business; and .. . · ·. . .· . . :.
> · N9tably, howev~r • .-. it ,w~s· BSP J3Jrcular: .N.o .. · , 3.. De.spite defective cqnsignatio~. f;.b~
·the time. of
:41.~ •. .uly ~9 •..J 9!.4, Y,1hi<;:ti }ntre~se.d;.th~ in.~er~.s~ · , .
1 ' .Jh_~.Pft.e(c;1r:id·t_e(ld~~(9f paYm:en\ (§ 19(EN[lt.J.O;
to- oe imposed OQ--· Judgments ·mvol'{1ng · · suprfl e/ 452) .. · · ·
. 1· . .fprbe~rance,of-cr~c_lit from 6% undei-·P,.rt.· 2~09. ·. ·1 · . , ·:. · .,. •
· ·to)2o/o. Originally, Art: 2209 only.inade mention lnc~eas~ i,n ·!nte_r.es~Rate ~ · -,_.. · .. . : .. . ·. , :. : .
oLa 6%.rate.an.d not 12%, 1r~ Supr_~rr:ie.Court. No increase, in interest shall-be due .unless such
also.already. took.notice of.Ci.rc1:1lar. 799, which inc'r.ea~e has.
~lsB: b,e'en. exprissly ·i(ipula]~d
. revised the 'interest'rate, for loan or.forbearance· v.
. ( Security Ba.nk &-.ETrust Co .. RTC·Makatf, G.R. No .
... of,)honey·, g00ds '0r crediJ, to .6%,. and e·v.~n· 11392~. Ocfob~r '.23.~_ 1996;:, Spous~s .: T6ririg::v:
·a·pplie911re_-saryie in [.yl1ngs subsequent to the·· _ G~nz9.n-~tan, ·GR No. 16~7~2;· Qctobei.10; 2008).
circular's issua'nce ,, · (S.C ... ·. Megaworld .
Construcli?n· and Development Corporation v.

.. ~
-
.648 2019 SAN SEDA LAWCENTRALIZEQ BAR OPEiAATIO~s·
 It was· held that the- unilateral determination and · Formul~ · in ·tornputing, Interest f~r . Loan or
lrnpositlon. of increased rates -is violativ~:of· the Forbearance ofMcmey:. .
principle of mutuality.of .coritracts ordained in Article · .: •• J •

1308 of .the . ¢ivil.'_Code (New.. Sampaguita v, · PNB, .T,OTAL AMO UN"( jJUE =.. fprincigal )· interest +'
.GR _No .. 148753) July 30, 2004) . .- . : - -'> . interest oh inten;st]-.-partial payment~ made· · ... ·
. • ; .•. >.:. · .•

Liability for Interest in theAbsence ·stipula.tion . of x

lNTERES-T == prin'cipa~ stipulated interest x number
1. · lqciemnlty,for,Damages. . ;· · :'·· · .· , of years from auedete until firia(ity·_ of:judgmeni, .:
· ;_ ·\ · A"debtor.in· delay-is' liable to pay- legal interest INTEREST ON INTEREST,;, Interest computed as
(DE LEON, supra at 72). ofth'.e·fiNng ottbe.compteint x--6%x.f10:-ofyears,until
· · · _.. · · - .. finality'ofjutlgmeh't-- . , . · · · ·
r The:bb_l_igatio'n con~isting in the paymen.t of S\JITI . .. . . .,. / . . ' '. ; '
-ot money. referred to irf Art. :2209·· of the-Civil . Note: Total 'amount due as of thedate ~l.the fih91ity
_-·: .. "Code is Mt ccif'1fi(fed to·~-lqa'l orforbearance of of judgment will earn. ·a_n _interest-of·.6%: .perahrium
· · -: rrj_or\ey butatso'covers casesirivolvlnq defaultln until fully -p.aitl '(Nacf!r v. Gall~ty:Frames,- .GR: No ..
· . · the payment of'prlce cir corrsideration-under a 189871,: August {3,. 2013;. $angko. ·sentral nq •
.:contrad:orrsale; an
action'fordamaqes for injiiry. · · Piiipinas 'fy!cinf}t~ryBoard Cir"cular~No/_799,i Seiies,o't. ·
to_:p~rsons;,'alld- loss qf property -and ari' action ·. 2013) '.·. · · ... · '~ · · · · ··. ('' ·:: ·-· · -. .
for dam.age'~~ arising'-from' .'unj!la.id" jnsura~ce . . .... ': <.. . . _.. -_:, . --:·:.·' - .. . . . ..'·,. ' . _-_,: .. 1-
clairl)S (Cast~lo. v. CA, G.~. 'Na:· 963Z2, ·May 22,· - lilustrations: _ · · ·.·.. ' '.;; · · . . ·\~. .
.' _ 199'5). · - · · '_ . · · Under a written contract of loan; B obliged.himself to
~ ' · -,: .. ··, · . . . - . ··pay A t~e surri of P20,QOO·al'the end ofthe ye·a/.
;' ll)tE;fresi·'as indemni~y:--fbr -.damJge:>-· i~: payaple. ir:no .payment qf irt~rEist was· _me~tipri~d; then· r10
;:only·in ·case _ of default "O(~on-p_erforr:nance,of the' . interest;is·due. :' ·· · · -'. · ·. · ·:- ·· ·,:.: · · ·- · ·
<' col')tracr· f5s ·f~ey, ·are distinct .clc1ims, th~y may ,, · . - - ·.
v:¥' he
0

,· · oe aerrianded :'separatelyr(Seritfh.el Jnsufa1)ce· it Bincurs·ir'fclelay·, is lii:'lble t~ pay,jnfer~it: at· th~-

CA;'.G'.R: .tiJu:·L~524-B2, Febiuary'23;-,.·f990). : l 'leg?tl rate_w~lcn, .. 1,s 6% per,c;i~nu~ or p··1;200 froT the
:.· · .:-.·· __ : -:·. -~~-· · .. ··if·:-, date-ofdelay.i . . .·· · ·:.· · .' .
2·. ,lhteresf:Accruin·g~from'.!Jrtpc1id;1rleiest.#._ '.i- . .. -- ·_/ • · '-\ .. ·. . . •, 0·"· '' • ': •.. •. • -'.:· ··

Interest due shall ea·rn iriter.estfr5'"'mltie time- it-1s , ~u~p6~~J~h.aii·'.~\d~~·stip~i~t~'.~~~~--~h~i~ cb-~tr~br 1ri: :
. judicially· demanded aith"OiTgh1~tlie "'oblig~tion··i5''· 1nteres~-qf -18% a ye9r wh1ch-1s Ja_wful. Jn .this. case,
. . .-_ : . ·._:_sile.. n·t ~,P__ o_n__ t_his_..~-~-~i_n;t_:_fC. ,(_V._/~.·
-~Q&J __~~_2i_}2).~ . .:. . all ·t!:ie r~§Li,\i'E;rr,,ent~to_; ~ntiUe ·A to ·re3co_v.~r intei"e!,t ..
~ · J,,f. ,1 . ,are pres_e(lt.Jf...13:--i~_cur~ in delay •. h~ is·li~ble.to·pay · ..
· -Exception.·. · ·. :·:·: . · -.: · :/ · .· · ·-the-interest·;:1gre_ed upor;fas·dc!ma'ges·and notforthe ·
~-Where~ ihe court's judgllieht, which' did. not .. ·.use o_f/h·e money.:· ,; :. .:... 1 ·, • :' •• ·: •• ,.: ·- ,; , ··, •
. provide for the payttjent bf -int~rest ,t;\a?J_ire.ady·' . . -· .... ' . '. ~- . ', ·. . . '. ·. . . .. ___._, . \:. . ..
. . · .._, ·. ~ec~me1final,.)~9.,inte're.st,-m:a"y·b~"a~~9 ·(Ry1~ · B incurred), delay-for·or;ie year:·1he_.·icid_emn_fty fo:r ...
. . ·· _. v: Caneb9, GR: No1~4BB,4;:p~ce~l{e(_3, f!i?90): · · ... , ?,~m.ag_es ~-h~ll _also: ~e,th.~ stip!Jlated i~Jef$~t bf 18'.'fc_o .
. .-_·_ ·.· · .. : · . . · ·, .· .--·"··'~--- ·· so·th1'!t B.. ~h.a)l_~e··t1aple·t?:-Paya;totalof_P-7.?'200:
. :: R~le on Accru1rd -lnterf!!st.. ·.. · . ·. · · · · . p3·,500, as ·.compen:3~tory_:i9terest.'.f~r_. the, first ,Y,ea:r
· - · ·., , ·:Ge~erahRule:··.Aq~rued <'interest (interest ·:due . and.,anoHi.er· P3,f:50_0·as iiidern_riify..fcir:th~~dam_ages
and ·unpaid) wi_H n·o_t bE:?af:interest (CIVJ~. G(?DE, . for t_h_e one-yea{ciel~i'y: ,:: •. ;-(.. ·'. '. . : .• :, . \ .._.: . ·... ~j -,
- Art. 1959). · ·· ·· - ,·· .. ,·· ·· · ... ·. ·. . --: ... ."·.. · ·
· .---. If. ·the ·interest,was·:judicially:-demarided six m·onths .
· · .. · :-E~ceptio'ns: .:._._ ·: :_,:· ,··:_ ·· .. -:.· ;_,. ·:r· :: , ,.·· ·: .- ·after. B-·lncurred"in· defay,. th~ intejesf due.;(P3.·,6Q_O. +''. :
.· . - ~- ~ t~~re"T~. agreem~'nt .tq
thfr 'effe.ct (CIVIL · .. e~·,aoo _;::..p5,4oor s~alLE:9rn a'J~gaJ i_nt~re~_t. of 6.%;
-· .'.:. .·C,(J)Of;;
. .. Arf.',195.9)._: ;·' '.: . ,,/
'\. · fr,om the time until-paymenris- made . .-:; · · · . ·"
. . . ·>.::.. '' :. ."-:··· ~-· ~ :,< . -··'" :-... · : :._ : .; ·-1.• • . · .·
. ,Drscountmg·,\
,' :, ' . ; :'. ,\ . . ·' · >_ :
, ·
· . . ' . · ~ . /t, __ :\,.
. · ·,. · ,: , . ·::"' ~}-,,,.
·, .-' . ·,. _::::·,. :..:,;:,;-\·
-· , .. ,_, · ·.
..
·'.·,:· _-·compoundihg lriter~st .· ,·.- .. :: . ,. .
. An ·exptess:stJpulation..wheteoy the int~rest -- · .... "(.; lhteres.t -~.is'• -~de.ducted ·:in·.' ad~ar1ce. 'from :.,the
. due,• ·and "unpaid :shall be added. fo. the ....
r ·.
' procee~s of._the_prindpal. o~lig~ti9n._: ; ··: ..;,;,--.·;·_ ..
- ·.: · , -· · · prin9ip~J: obligation·· and::'.resulting_ ;_to.ta!. - • ·• . . . ·.. I ·. -... a· . ._.· . . .· .•

. · . . :·amount.?hall ear'n.interest-(9'= l.iE0N, supra· _ . ··Illustrations:· ···.~·-. :.- · ... I<·., .'-. -·-. ··T .• ;,·.· :.
,, ... -at:6"7).' :, .,,.,. ·._ .. ,· -· .·.·. ·,.,_,Th_~:-::stipuiated "rate .. ~~i inter,~sbJsi '6o/o:'1i . .-the' . -·
·: principal amount io~ned is~Pf0,000,: how m~ch.
,b:'. : When- judjdailY: demii"nded.' uridef.. Article - .:. · s.ds th~ inter.est? I. ..: •·.
,· - , . . . .,,,:.-.

' 22-1.Zbfth~ Civil Code·(id. af68) .. ·_-·. ··_,·:

. . .. .. ,· · _. .AnsV:,~/pfo·,obbx:c:i.05 . ... ·'
~~o·o·. ;::_'.· . .
~ .. .

2019 SAN.SEDA LAW CENTRAi_17FD RAR-hPFRATlnNs I fi4Q

 CR·EDIT TRANSACTION·S
Sl)N BEOA LAW CENTRALIZED BAR OPERATIONS - MEMORY·A/0•~019

2. Instead of givi_ng P10,000 as proceeds, only However, C.B: Circular. 905 _did not repeal nor in
P9,400 ·was given. P600 .was deducted in · anyway amend.the Usury Law.but simply suspended
advance but the amount. to be· returned is the latter's effectivity ($ecurity Bank and · Trust
P.10,000. What js the inte.rest rate? Company v. · RTC· pf Makati, G.R. · No. 113926,
i.;- ' ' October 23, 1996). · · · ·
Answer: Divide the amount of interest by the
.. · actual amount received oy the borrower. Validity of --unconscionable Interest· Rat~ in a
=
· 600 I 9400 6.38%.
. . __,,. ' _Loan · ·
General Rule; lnterest_stipulated.by·the ·contracting ·
_·should the vendee opt-to purchase a subdivision patties is. vali~. ·
lot via the installment payment system, he is, in
effect, paying interest·on the ·ca.sh 'p°rice, whether · Exception:- . .lf. the· interest is 'unconscionable (OE .
the fact and rate of such interest payment are LEON, supra·at 102).
disclosed in the contract o~ not (Relucio v.
Brillante~Garfin, G:fj. No. 7651.BiJFIY 13, 19_$q). The Suwet:ne Court said that nothing in said circular
suspendinq-the Usury Law gfants lenders authority
LiabiJity for..· Surcharqes and Pena.lties to. raise interest· rates to levels which will either
The· essence or rationale for the payment _of interest enslave their-borrowers or leadto a he.morrh::ig(ng of
is separate and distinct-from that of surcharges an9
penalties (DE,LEON,_supra at 79!: .··. < u !fl their assets' (Sps. Almeda v: CA, G.R. No. 11-3412,
17,·~.· .· ... . .·. . . ·.

A penalty stipulation is not necessa~;iJ~lu~or..,........... ]ri tvtte{;,>G~(G.R.No. ·131622, ryovember_27,

interest, if there is an· aqreernent t1ttat- ~·~c, the · .. .. 1~98), it-wa~lslfd=that wh_i\e a stipulated interest of

febryary 12, 2002).

Usury .
.
· . .
.
·
·i -~ ·
· two (2) being distinct concepts-whicf ~~l-~P.2rately .,52. 5.5% per ~ont.h._op ~ loan is·not usurious pu.r~uant
be. demanded (Ligu.tan v. GAf 1,,§R; f)/o. ,1386~f.n

·
?. .
I. · p~•'\,,.
Jr.
T
·\9--8:B, Circ~~.~~~, th~. ~arne ,mu~t ~e equitably
1;!1~ .r.educed for being m1gu1tou~ •. unc;onsC?1on?ble and
exorbit9t It is e,'&rart to.rnorals (contra- bo_nos
-. ..' .. ,.
:·•1 ']J...?,!.~/~·. It. W~!, ~ped to ~2% per- annum in
something in excess of the amou~t allowe~. by. la"\~o.~ : .. · .. .. ~ . . . : ·-' ..
. foe. the loan. Qf _forbearance~-.,.fll~~ y; goods or·- ·-When .. -~ agr~ed: rate,· ls inlquitous and
.ch~_ttels (DE LE,ON, supre a~r4~) . ~ Jgi. J...~uncq9sc1&ta~leiftn~ rtsmay reduce the sa_me as
'
. : '.·· · ~ · ·. '--: · . ~- . ~ ~, -~o..~~-eq~ity.-dem~nd'.(lmperial\l. Jauc~~-n, G.R ..
Ele~~!'lts of .Us~.ry-. . . . ~. (5) . .Y~~ q4,
. Jpn~.1 f,J20~4).. .: . . . . .. ~
1. Loan or forbe.arance, - ·· · N_ · ~. ···f· " · · · ·
2. An u~~erstahding· be'twe~·n he p~rties thatilll.~iEN\~t~~~e[Y otUnstip_illat~d Interest .. , . :_
-~. loan_sh~tl or may,~~ returned;;_ . 7 ~l~,~.rw,~~· _the·debt9r may recover as.(n t~e
3. ·A'r) unlc,1-.yful i~t~nt ~o \a~e_.mqre tha11 iBfJ1 g~I"? ·. •.c.~s~:d('s21uJ.i:o indebfti: or u,:idue P8.Yrn.ent, (_GIVIL · .
· ·rate fo'r _t~~-.US~ of ~oney·or its equjvaTe_nt;,,51?d .
4 .. ,:-_he. taking or aw~~mg tQJa.~~ for.the _use...ot tb~. I
M {G;0ffi, :P.rt~96~). ·. .·
~~ · . . · ·:-: . .,: :._ · , . :·· .., , . ~-
.. . · ...

.. Jo.an of.squ,ethmg· ,n exce.ss pf what !S all~Note~_lf,yoluntanly-pa1d, th_er~_w9uld be no recovE?ry

: ·. by la~· (DE LEOiy, ~upra at 9,4-95). . . as'. in thE'( ca~e of natural ob)igations (CIVIL~ CODE;
•: , . .· . . . . Art. 142:3): · . .· · · ·
The ·nature· of \JSUry law is both,remedial a~d penal -...
uncf~r Philippine jurisdiGtion. (DE ~EON; supra 'at 96). 'Escalation·. Clause , must·:· have de-escalation
· · · · · · ' ·' · '· · · · ttatis~ · . · ·· -: : · · . . ·.· .
Contracts and stipulations; . urider · any cloak ·,or. :' ·. Escalatio11 clauses ·ref_er to stipulatio·ns.' allowi!ig a_n
d.evice whatever, in_t~nded to circumvent the law~ . . . incr.ease in the ir:,t_erest rate c!'gre~d upon. by the
against. usury_ ·sha~_qe v~id.· The bo·rrowe_r·. may : ·- cqntracting parties. (J.uiqo ·v.-_._CfJina:Banking Corp., .
· recover iri ac·corqanc~ -«ith the laws. on usury.(CI_VIL · G.R:·.No. 187,678, /i.pri/. 1 o,· 2013). ' · ·
CO_DE, A,Y. '1957). .. '
De,:escal?tion clause is a s.tipulation tbat the .. r~te of
Pur$Uant to:. Central . Bank.' 'circuiar· . No:.
gos: interest··agreed upocvshall 'be reduced in the .event
adopt_e~ .ob_ Decembet22;.1982, the Supreme Court th.al .the maximum rate of interest is r'educed by law
dedare:d. tl:i'at' · tne. l)sury. . ~a.w is·- riow
"le·gally or by ·the Mt;inetar{Boar9 (PNB 'l. /AC, G.R:·No.
in~?<iste_n.t_". The interest chargeable :depends. ·upon . 75223, March 14; 1g90; °Villa ·crista·Monte Realty &
the'.agreement between the lender and the borrower Developmeqt Corp. v:
Equitable PCIB.ank, 'G.R.' No.
(Liam. Lai,y . v. Olympic .Sawmill : Go.,· G.R. · fvo, L- 208936,.1>/ov.ember 21, ?018). .
30771, lvfay-28, -. - ..
1984);:
. . . ·

650 , · '2019 SAN SEDA LAW CE-~TRALIZED BAR OPERA TiONS

 CREDlT:TRAN.SACTI O N.S
. . .· . . . _., SAN_ BEDA LA,W C_~NTRALIZ;D BAR OJJERATIONS-, MEMORY AID 2019. . .
Nlt!W¥$Mifi' M:Pi' '#I 1¥t-!:'?V'.' S$£ii@ 5'! Mrt! id' ¢¢inifb¥ 1$?-.&4Q4?Mt#Wtt-Bl HM &dibiikQ :t' t§t§£f&Wt3dtl91fJ4 B±-t f R¢id4f7?.
<,

The presence
•
of escalation
f
clause :wilho~t
•.
the· .
2. .!,!nilateral-- when deposit is gratuitous; because
correspondinq.de-escalation clause in the event of a '; ·.·. . only the depositary has an obliqation (DE LEOf.J,
reduction of interest as ordered by law, makes the sl.lpra ·at 145). · · · ·
. ;.
clause .one-sided as. to rnake.it unreasonable, Any
increase . in . the interest- rate pursuant to -an. Note: It becomes bilateral .if compensation is
escalation clause must be the result of an agreement paid because it gives rise lo o~ligations on the
between the two. parties. Increases unilaterally pi,irt of bgth the depositary and depositor'(Lct: at
imposed by a bank are in violation of the p(in9ipl_e of. 145):·. < ..
mutuality of contracts (PN~ v: cA,
G_.R .. No. 109563, ·
July. 9:1996;: !Equitable PCi Bank v.: Ng .Sbeunq , 3. Nomin9te - it has been given a specific name by
Nqot, G.R: No. 1·71545, :tJecetnber 19, 2007). ···: . the. Civil· Code (Id.. at"145). · .. ·
. , . ·. .
· 4, . frincipal :_, its existence is not dependent · Ori
It becomes inescapable for the Co1,1rf to uphold. the . · · ·· -· another contract (Id. at, 145). ·
validity anti enforceability of the: escalation clause 5._ . Jnformal -· no particular· form is required for the
, . involved. herein despite, the- absence .of the de- . contract (tel. at 145). _
. escalation. .clause.. ,The·. actual: gra-rit by .. the . ~- . Qratuitpus -: the bailee does not pay the baller
responderif of the~dicre9s~s: h,}the inter~st rates . 'for the use of thethlnq (Id. ~t 145): .·
imposed . on. the "loans extended fo·..the petitioner
r.t~ncfered inexistent the ~yil of i_nequ~lity.:sought tobe Deposit v:·°Mutµtim·: ·· .
' •,· . ., ' ' ., ; . I' ·;- ', I

thwarted by the '. · ~n~cti:ne.nt 'and application'. bf ;,_

~~~~
. Presidential Decre:.e No, 1 ?84_. w,_e. do nc;,t see._ here· a
situation 'in which' the. petitioner. did not starid .on
equality vi_i_th ·. the ·-1~nder· b·ank' (Yilia. ei-ist8r ..Mon.t,e
Realty & Development Corp: v. Equita~l5/e. PC/ f3aqli,

'.
- G.R. No. 208336, Nove.inber 21, 201 B). ·
. - . . . .: . . . . _··,·· : . . .
· :'' .
. . - . . . _..... -:
· _ ';J

: : • J •

. _Principa) . \ -P~r:pos~~. SAfEK·E~PINC3 ·_?)nd .. -: of

·r"eturni~g the sarri~- (CIVIL. COD~, ~Art 19.62J; : · . .· ...
. ..
. . If '·safeke~ping~ is ript the. principa_l purpo_s~---it1
.- ·1..' .Commbdatum; · . .
be: ~;y _G.ehe'r~{iy ..• ,:·~-g~atuitou~~ ·. -~ay . be:.' grati:ii~ous,; ··9r
~· . . .• . .. . . .. . ~. . .. ·. ex_cept by,; · · mutuaJ· with a-slipul_9tion·to, gay
_2.. [e_ase; or . . _ : .. · . .. . _- . . . : _€1gre~me,ni_: .. · .,- or. -int~rest·:(C/Y/L' CODE,
·. 3.· Agency:(DE.LEON, supra at-150).. . ·, · .·. ·.
I• r •• • • •./ • • • I • • c:ieP;~sita_ry' i~ ,engage:d_: Ad_ 19,J~, .3J:" · > · ·. ·. Pat-
in 'storing. goods· (CIVIL. - ··: · .,. . ·
. ,, .Gharac!!:)risti_cs_: (RUN)'JG) .. · . · . .· . . ., ' . cppE, Art~ 1965)_, : . '. . . ' . .
t ,' ~e·c;:i1_-co'ntra~~ ..::._·p~rfect~~fb(the_ de.livery qfJt,e ·
'"· ·. s~bj~ct ma_tter.(CIV/L:~ODE;·Art. 1-316). . . · . .-
. ,· .... ..
. . :.
. ',. ~ ··. . ...
~
,1 •
.. : . An._agreemerit to.constitute a_-depqsit i~:bin9ing, .... bepositor''. c~n- ;,• ( . :"'

demand: The· le'nder; "rhust '\tait .

· but the deposit. its.elf is· .not perfected· ·until the tfie _".return
.. '•
of -t~e subject .untii'the' ex"pirffitfbn of the
' . ·' I
.. delivery of the. th'ing (CIVJ'-· CQDE,:Art. 19q3) .... • .. matter at. will. . period·_ granted to the.
-.,\. . .· . . . . .. . . ·,. ' . / ·.... . debtor.
W.here there- has .been ~o delive~;. th'ere '.is.
merely an ag"i·eement to deposit, wh.ich how~ver (DE; LEON, .s.upra at ·151-152).
• •• • f ' •.• • ••
·.
is binding ancf_enfo.rceqble on the parties. Suc·h.
agreement. is· cons!:!nSUc'il (DE. LE;ON, supra at
152) .. ,·. ·.·. ~ ·. ,,·

·2019 SAN SEDA LA w CENTRALIZED .BAR OPERATIONS I 651 .

 c·RE.DtT T.RAN·SAC.TIO-'NS
SAN BEDA LAW CENTRALIZEDBAR OPERA.TIONS- MEMORY f\lD 2019 · ..
'"'~iRt:Si!SP:f'faSS!Mi -#W#i:i!ttW'o '~5 $ #cs& :--12SAAR
. .. . . .
:Ztw+ei: fNi4fP·<M!hffif!51t}4 it! i¥Nft•,.fi#i£ 41Yf>1i£·®t&SRG@SR41

·Depo$it v·.. Commodatum - 1968" to 1995)> The depositor has complete

freedom .. in choosinq the· depositary (DE ·
LEON, supra,at158). . "
b. Necessary ...:.,.made in 'compliance with: .
i. A legal obligation; · _. .
ii. On occasion 'of any calamity; .
iii. By travelers in hotels and inns.ior · ,···
iv. By travelers with common carri?rs.(/d, at .
205),:· . . ... · .

·:i:he depositary must, 'The borrower can use·the

as a rule, return the'. -thinq <for "the-, period Note: There_is a ·1ack:of free- ~hoke• in ttie
thing ... deposited upon' stipulated, and :_.-can· be deposiicir (Id. at./58).
demand (Id. 166):, at 'required to return.only in
J'µdici~l .v. Extra-ju"c;licial D~po_sit _ · ·
· ·. ·... ·; : ). : -~· .,: · .ease 'of urqent ~eed or . '~ • • .:.. . . •. .u,' ·, •••.•
wheri ' the bailee · has
:: ·.. .: ' . ·, ... .'· committed-any of,th"e··acts: ·v

: :·. ·- ·- . ·. . . . -<.::-~ ·.. ·,; '-:·,' . ef!.i jngri:itlu.de,; 't'.inder:..:'Ari.

765 of the: Ci1/i1· Code.
~=i==~"-,"..

. "

·....

,· ~-. ...
.:,.::, ""\

.... 1 ... _ - ·'·· ~·-~: • .. • • •• • • •.•• ••• !.. • • , .... : ... ,. r» ·V- ,;_(, I ••. 4

· .~e.n_E3rally_grat.u_it9us_- ... f-lwi:iys o,0,..er9y_\5·'· · · · ·, . '

. _·_ It1!Jf ?3?!/l\!:!}ff-_:~!:i: :_~DjI:}t;<;:~tf:(··:~-:-\:?-.:;.:

· · ..Kioi:Js,,.o.f 0.e'ppsjt: '(CIVIL.CODE, Art.196:i/)- . ·. · -,
• -», "'.,; .•· ..~-·<·~ .:-.'-..';/-.' ..:;.~c. • ... _._ ..... ,. ... ~-;·,:, :, ...~ ... ,.-.,. '1:i; .... ~,- · _

' :{!~:t}::~J;:.~ _.;_ ':~\_',.:~: ~: '. .~; ~~-:<_>:.:_\;.: '\?:·'. ):,-<_\·

f ·:~· •• ··-~~,

· --:-~: - ~}--1,d.1~.!atqi:-, §~,qµe?tr:a.b.c:m.:7JaK,e~:-P.lc!C!:l:.Wben· . ·

. ;. , '. a6,)it(~_GJWiI~rt·.c/&~i;fri'ri~o(proper:fi:ir/)1ilg:a.(fo'.n : .G1:1nerat Rule:'" A: dep'osit is: a grat'uir6us co'rHr'act .·
·.is.prdefed:(OIV~-:,cqo,E, J!,tfs, 2005~2008) ; ·.'
- ·.. . . :·.. ·.; - ;.,~- ··~t"':. ' (CIVIL CODE, Art.1965). . ., . : , . ..
- ..... '.; ..-:... :· .... '~· .- . .
2. ~xtt~-judici.{ · · ··.,;. '. :·- -. · ,:., ::: ..... ~.-,, ·., '. · ,,· · .-
.Exce'pt_ions: (~ES)':-~~ ·::- ,-_ . ·.. -, · : .. · .· '.:··,
a .. ··.YdlQr,tary_ - gelivery'i~_-m'a9e· by the will' of
- ·. the deposltor or by two ;or,. more. persons 1-:~. ~~-~n "!he"re'_i'i\a ~!!P.~l~t~·nr .... : .-.: ·._ . :.: ·.:
. each _of whom believes· himself entitled to .2. 0_Depo~1tary rs gngag·ea n-·busine~s· of'·$tonng
·· · the·· thl'ng 'deposited (CIVIL ·. CODE, Art;. gbods;·and. ·< · · · · · ·· · ·
.c
....
652 · I • •
'?019 ~AN· BEDA-LA v,rcEN~i:k.uzED-BAR OPERAr10Ns
- • • • - j • •
 e U &if#IW 7!1-fM:s&S 64WEW MA ?WRfu1.I e MQl!!t§

. CR-EDl·T TRANSAC.TIO.NS
SAN BEDA LAW CENTRACIZED ·aAR QPERATIONS -_.MEMORY AID ·2oi9

3. Property i_s §av.e.d . from destruction without· Obligations of -a Depositary . , . . . :

knowledqe of the owner {CIVIL CODE, Art. Obligation. 1: To . keep -the thing ~afely. (CIVIL
2169). . . . " COD~, Art .. 1_972). . .
. .... : . ~ :. .
. , Note: I~ case two or inore persons each believe that -Rules: ·
a
· he is'.ent\tled to thing deposited witha U-1ird person: He is liable. iLthe· ·_I_O$S occu_rs thrcfugn: his f~ult. or
the depositary shall deliver it to the person to viho"m neg_ligence (CIVIL G_ODE,- Art .. 2207), even if the
ifbelongs_:(CIVIL CODE, Art. 1.968)., The remedy ot" ~ thing is insyced ·(CIVIL COPE,· Ari. 1170);
.the .depositary is to 'rne .. an· acllon .for lnterpleader .
(RULES. OF COURT, Rule 62, Sec. ·1). ·- , . The loss of the .·thing while in .his possession.
, .·: • ., . : ., <. . - . . ·- • . ·. \· . . ordinarily raises fhe pres"umption·0f,fa.ult·on. hispart
Note: The. depositor need not b¢ the owner of the (CIVIL 'coee, Art: 1265). · <'
thinqdeposlted because the purpose of the contract ' . • I • • : •

issafekeepinq and "n.ot: transferof ownership.. The r-: Degree t?'f Care· . , . . . . .. . .
~ ·.. depositary.cannot demand that the depositor prove ' If ttie contract does notstate. the. diliqence-which is
hjs:ownership of the th_ing deposited iS (CiVI& C,O.DE,· 0
tobe QbSef".'.ed:'i~ the "perfprniance;"that·of a good
.: Ad.-.19,84, Par. 1 )." The depositary E/stop'p.ed tCIVIL father ofa f~m]ly.shall be ~ei"quired-{CIVIL CODE, Art. .
1.
'CODE; Arf:.143p). . . . '· . , 197?, 117_3t/ar..2:). . · • " . -: .. • . . • .
- . . ,; ' ~ . . . . : . '. .. . . . ., . . . '. ~ • • ',_.1 • • . .·. J·~

A'co~tr~~.t~,f deposit may be made orally or inwritinq Reasons~ · . . .·

(CIVIL CODE, A_l;f. 1"969). · .. · ' · - . · .. ·.1.· . )t is.an.esserttlal requisite of the judicial.relation
. , . ", . . :·· ' . I . .· . : whipri__.'.inVOlyeS the depOSitor'.s:~-C~nfidence. in
Reason:' ~o written form is 'required 'b~~aus~. ttie ·. ·good faith and. trustworthiness. . .,,
., · contract ·1s . real, and thus, the delivery. 1tselt 2~1?re?1/mptio.n·g,at"the depositor; in choosinq ttie
- . ' ·, co~sthut~~ performance· which will e.videnc.if:the dep~rl too~·irit<faccou~t the dilig'e_nce whis;h .
.. ·: pert,ecti~.n~of the Gontr~ct (f!F=LEON; sup_ra·at 159). . . · , . '·th~dep.cf\81Y.i.~ a2ci.Jst~rTied wi!.li reSP,eCt to.his.
'· , ''·: .· , · ·: ·4. · · : ': o~n.-psopl~\OELEON, s~pra'at_193y· ....
. . Eff~cJ~. o_f t~e lncapac1ty·o.f
. :. : Depositor: :· . .
_the)?,~pQ,~!~.arY or · , .. · ,· .. .:.:.~/-·
,. rl ~- · · · ·
·:
Exceptions:· · · . ' .. ·
. 1:.· .·,1 .,tlie'.-:dep~'sita'ry· is-' c"apacitated. h~ is ."subjec:t. · . ·. · . Tt)'(3. - 'i-'ei~~.\re" .
. 1 ••. •· .•• ·::· •. · ,. -:", _ ••
··: :- · · ·· ·"·. · ·
.

o"f : 2are ,s' .-·e,<ir~o'rdi.~a_ry. ·

-
·· · ·;
•

deg'rei ·
.. to a.II t~e op ligation~ of a. tjegc_fsitar.y.,iether. th.e ·. . . ·. di)JQ~~·wh.en: · . · . ---~.. . · ,: .• ·: .. , ~ · - ·. . · .
. . . d~p0s1ior IS capa_c1tate? :oi{ not (ClV!d. COpE_~t 1". ;i It !S th.e .. depositary who volunta:1ly offered 'to
Art.-~1970). · . r -~:;- · / ·: . keep.tb_e tfi1~. . · · : · ·
J• .·.__ • •• • • 2,,. Th'.e d~po_sit i~ ~orn~~flS~ted;
- • ·: • • • "or· : . . . . . .·
Nbte: Under: t"he law, "pe.rsons. who cap~blei· are"
3. The·. deposit''produ¢.:e$ .benefit to"the '9_erfositary. · '
cannot· allege·th~ incapacity ofihose wi.th wh0rh. .·... (.5-:"t,c5;t1;_NTINO: .s/iprh.at 460):. . : ';. . . ,. . . ' .·
'-J~·e/confratted"·(GIViL CODE, Art;_[J~71, · ··' . ·, ·,. · . · . . . .., ·. · '· ..
.. , . .-- · '"~ - .. · · . · · _. , ~' Qbligiition. i: To r'eturr. the:thi~g-JC/VJf.:·.-CODE! · ..
2 . ." "lf th~ d~posita:ry is incap~citated.~he eloes .n-~t- _,-f.._rt.-1972);.. . .. .
· .. · .jnt:ur"the oblig~tion 9f a q~pqiitary. _l3fo~ever,· he • . . ' .. ; . ·. :· ·:::.: ~; : .. · .. _. ··. . · . ;: . . .: . . '., '"i.· ·
is. li:i:il51e :10:··· . .. . · . · . . . ' ·:·. Person to'Whdn:i th'e"Thing Must Be Returned:
.. '·. a~-- .R}:iiqrn "the 'ttiin~ _depqsi.ted ·v;,hile still in. his·
. . . . pdsse'ssion; oi- .. · .. · . . .. .. : ·... ··· .
Deposifor·, :.fijs··· hei;s" ;ar:ici' ~u.cces.s6i/
·.. person who 'may:t:iave peeh "designated "in .. the .
f: the -.~r
;'. . :~6:,.· Pa:Y- t~-~-- deposit.or the'hmount' by w't'iicfi he. ;· ~6ntract (CIVIL ,COPE~.Art.. •1972);" · -·< .
.. . . · . . .m'aitiav~: benefited hirj,seH with ttie thing:C:>i· ... . . '· ·.: · · . . . · •.. ;.. ·:· . .
. · _.- : : : .. ' its p'ric~·-,subject" to· the'·. rfg~t· of ·~ny tl)ircJ . . . .Nbte: If 'there ·are· two· or .more persbhs each
. . person 0tio··acquired_the.thing in goor:J faith,'· . claiming·to be entitle·d'io'a thing; tlie·d~P,OSitary ,
.. ·, . : in whiGh case th~ depos.itor:"riiay oniy bring ' car:ic..fjle" an action to cOnfpel the ·de'po!';iiors .to"
... ·. . _ .. a_n .acti_qr:i:c:iga1n~t,him fd~ its ·recoy,ery (CIVI~. -~- inte.rplead . a_mong' t)leinselves · (RUL.tiS .OF
: __ .CODE, Art: 1971): .·. / · ·:.. .. . . ..., :_cbURT, Ru{e_ 62,·S~c .. 1f ~-: : ·.. _,>_ ...: . ~-: .
2·.. _-. Guard)an· ~r · aci_fn.1rfistrato~; ·of '.:th~_· pe~son Vytio
Note; A third per'so.n is. ~onsid.er~d _to.have act~d ·i~ . · _made· the depo$it ·if the_ tatter Js· incapacitated at
bad _faith if he· has actual knowled.ge _of the ir:icapacity" the lime of deposit _or th_e latter himself should he
of-the· depositary and if. he has_ knowledge that the · . ; ac_quire· cai;>_acity (CIVIL CODE, Art .. .'1970);: . · ·
. thirig is subject
. to the contract .of deposit.. . . '. < .·. .: .· .. , ·.· . . '.· ·.)· .' ... '. · . . \ .
·· 3.. Legal·represer:itativ(;r of the depositor should the
.. r • .• i . · fatt,er sUbsequently lpse:his c~·p9City during the· .
. depos_it (Cl'(IL CODE, -Art: -.1986): -~ ,
.. ,

. 2019 SAN BEDA LAW CENTRALIZED B.A.R OPERATIONS I 653

 CRED.IT TRANSACT·IONS
SAN Bf.DA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2?.19 .
~~25~'\t:~•w,;;,ae,: ,::t-Wta:: :t, ':Xlffi9't:£F*#lit:••, % Mi&P :: , 5&4:; t81'h I ;:+,"¥*iAif.'C.. U:::Z::c !$!!'#:2'=1 ii, ·, i§ ," Rf tffitl

Time of Return the same place where the deposit was ·made
General . Rule: Upon demand- even though a provided there was no malice on the·par1 of the
J
specified period of time for such return may have depositary (CLVIL C_ODE, Art. 1987).
been fixed
. (CIVIL CODE, Art. 1988).
.·
Obligation 3: Not to deposit the thing with. a third
Reason: The period is for the benefit of the · person unless authorized by express stipulatlon
depositor, but it may be. validly waived by him (CIVIL CODE, Art. 1973). · . .
(5 PARAS, supra at 951).
Reason: Deposit is founded on trust and.confidence
Exceptions: (OE LEON, supra at 169).
1. It cannot be .returned upon demand when. the
thing is judiclally' attached · while· · in the The depositary is liable for .the loss under the '
depositary's possession (CIVIL CODE, Ai:i- · toiloY.,:ing Instances: . . · · . ·
- 1. He transfers .. the deposit 'with a 'third p~rso.n
1988, par. 2); . · h · h h h · ·
Reason: The property will be subject to judicial ' · without aut only,. at1 oug t ere rs no
orders (5 PARAS, s1.1pra aff!52J: -negli'gence on his partand the third person;
- . . .\ .2 ... l:!e deposits the _thing with a third P.~rtq~.wlio is
2_ The deposit ·cannot. be returned upon demand, if. · · ,<manif~stthlycabreless or. ufnfit, ·1.~l!~ou~h a~thorized,
the· depositary ··has been .:notified· .of the . · .~=wen 1~ ~ a__ sence O neg 1gehce'. an .
opposition of a third person to the ,J..et~~lJ 3._ :r~e th1~g 1s_ lo_st th~pugh the ~~-ghgenc_e ?f h1~
- removal' of the thicig ·deposited (CIVIL CODE, . /-( 7employees- whether the latter are m.arn!estly .
Arl .. 1988,_par. _2); and' . &: : r">-
_ =<"' .
'J fareless o~ot. (Cl~IL C9~E'. _Art. !_~,73).
. . .. . , . . - . . '.;('). .v..K · -.
r- .
Exempt~fr~'l:.iability: Thedepositary .ls-not
Reason. The oppositor _m~. r claW1 t~ be'."'th~nsible in :c~se the thing is lost without.
owner (5 PA~ASJ $UP.r.a ~t ~~,- JP ~-.
tf~g)ig_e11,.ce. 6(t~third person with who~ he was
. . • . • , _ • ·.-c. • ~ iillowed fo deposit·the thing if such third person is not
3. If the depo.?_1t rs gratu!toi1s• th~ "depos\tary ._may • V ,; ·"manifestly care~ss)0-11 _unfit" (OE LEON, supre at
ret~rn the th!f)9 depos1te11cl -~~hst~~-d/ng)i_~-~ ~-: u\1 _ .1,ZP).;. . J . ',.....-:~ ' . · - . : · . . ·. .
penod has ~een nx~d for tn~ ctepos1t ,.~.JL.~ti_tia~lV, :·1 t ~',?. . • ~ .:._i ....
re~sons ex~.st ._rur __ ,ls :fJWJ1~
~f t~eposifo 'l,lUt.1.:l.!!!..:Note: Yl1~uep0~it~-r.y i~ .respof?sjb.le for the loss
fl
~efuses ~o re~~1ve 1t, th~ cfepo_s1t~r~-~~~ secu~e ::::;..--1::. bt.oug).1.f ;e). raJi1t o.~is erpployees _under· the
1ts .cons1gnalJ?.n. from .'fied'~it (Cl~~·li,I ie'Jl~n~P,)~ r;,sP.J'iiJlf t $Uperiqr (Id: at 170). , . .· .
Art. 1_989).
. : . -
.
, .
.
. .
\
.·
~
;-, l~~
I.""'<'~~~ ./_. · . .
,.~~f~_he i~p~_si_ta1 u~ge_n~IY_f)_eeds to.?~posit.the
·:··. ._'
. .·. ·:
If t~e: depos,t 1s··for? v_~luabl~ c_9_n~,d~rjl~g~t!'f111gfndj.here.1s.9ro m?r~:t1.rne to o_bta!n co11!:>ei:it,.
penod ~rwst _b~ !?IIO'A'.ed ev~n. ,_If t~~ a~po~~~,tY..'JE}tt.tb~d_eiq~itai:y sh~I~ be'aj:lle to transf':r th~ q_eposit
_suffers inconvenience as _a co_11seqll1-1~~ (~~~Q..lilq, ge,~r91!Y _n?t~be li~_ble fot the_ tr~~-~f~r of
CODE, Art.-198~)- - • · .. · ..YC,t'J., . the· ~eP.b~if (dnless Jhe·. !~ird p_erson, is .manifestly_
. · . . .. . : :· .; . . . u_ .
Note: In cases_un_der O) a0d (2), the deposi~
M-/cat'iJes~' 0i'unf)t) "(Of LEON, ?U.Pfc!. at. 1_70).. ; . . ...
.:· ·. ·. :.... · . · .' .. ": .. ,-:· -- .
~~st irr:im~_dia,tE:IX i~fo~m t~e. qep<?sitor .of tl:i~ .Obligation 4: To change tlie way oqne ·g~posjt- if
. atfach,:nent. and t>p'positjon (CIVIL CODE,;-Art. . u,r;:der the_; ci_r~uQis~an~.~~. _ the clep9sjfaiy · in_ay
.. · 198?, par. 2;. ·_ . · · · · ·r~as~nably .. p~resµ,r.ru,~ ·'th~qJ,e :c:1ep~~itor. Would
· · · ' ··- _consent t9_ the Ghange if h-e~kn.~w o.ftffe'taAts of.
W!iat.to ~~turn: . -· . .. . _ ·,· the." situation, p,r.ovi.d~d, thaflh"e -forirjer notifies
1. The thing deposited with , all its products, , the ·deposit.or· tfiereof and.
v/ait for' his/ decision,
accessories,.and-accessions (CIVIL CQEfE>Art> unle.ss 'c!efay would.cause d~nge~ (CIVIL CQQE,
· 19{J_3, par.".1)i · · . .· · . · . . · :, · · · Art: 1974( · .. , · · ,, 0 · · ,.- · ":· ·
2. · 1f hy ro·rce maj~_we or gpvernment or:deJ, the • · ··
depositary loses the thing, •and receive·s i;noney Obligatipn 5_: If th~ thing ·deposi_te~ sh.o'i.1ld, ear.n ·.'
or ~.nether thing in lts place, h_~.s·h~II deliye't the interest: . . . . I . . .
· Sl}ITI . or- other thing ·.t9 the __ depositor (9/VIL 1. ·T,o coliect· interest andjhe capital iJself as
CODE, Art .. 1990).- , . . . ·· they.faUdi.i'e;--and. -·· .- 's>·· ·;; . _ · · .
, · · ·· • 2 .. - To take-steps to preseive;jts' value_.and,rights
Where to Return:. ,: · w_ith regard to 'it (~IV/[ COpE, Art. 1975): · ·
1. If ther~ is·a stipulation, at-the pl~ce agreed upon . , · ·
by . the ·par:_ties .our the··--dep·ositor bears the lf"a pron:iissory note has b~en dishono~ed. by non-.
. . expenses for .trpnspcirtati9n: . ~ · payment, the depositary must give notice of dishor:ior.
2. If there is no ..stipulqtion;, at the· place where the tc;> -the indorsers so - tha.t the'_ latter WiHi not be
thing deposited·mrght pe even'i~_it should not be - dischargeafrorr:i liabi)jty (DE LEON, supra at 171).

654 ·201~ SAN SEDA LAW CENTRALIZED 8.A.R OPERATIONS

 . . •
. CRj::DlT-TRANSACTiONS
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
-; . ~ •
eit3!2:,:;.;:11=1S,?sm2¥-f4A#d,tn;:r, 1 ;ss1si¥ :;;;;ap:a w.-ss,i; , tii_;sc :aM-w,e-
1 :. :cv;:!ett:::1:: ::12ft'4ft.·2:t n@>~m?-'~ ~
A contract for the rent of safety deposit. boxes ..is a , Exception:. If safekeeping is ·still the principal
special kind of deposit. ~11 is not . to be strictly purpose of the contract, ·
governed.by.the provisions on .deposit. It cannot also
be characterized as an. ordinary contract of lease 2. If the thing deposited is money or other
because' full and· absolute 'control of the safety co.nsumables:. ·
depcsit boxes was not given to the joint renters .. The
relation between the bank and its customer is that 6f The permission to use it will result in its
-
a b'ail.or and bailee: the bailrnent b~irig for' hire and consumption ·an~ . converts the: contract into a
mutual benefit (CA Agro · Industrial · Development simpl~ io·an or mutuum (DE LEON, supra. at
Corp v.
CA, G.R. No. 90027, March 3, 1~93). 180).
. .
Obligation 6: Not to cornminqle thihgs of 'the Prescription ·of Demand to Return
same kind 11nd .quality deposited if so stipulated Thin_gs received on deposit do not prescribe, for the
(CIVIL CQDE, Ar( 1976)·. ·, depositary· cannot' clairri that ownership :of the·ihing
• • J r
depos.ited was lrc!nsferred 'to .. him, but simply .the
Exception.' Depositary ·can only comrninqle if. the ' custody thereof: · The- posiession 9fthe dep9sitary
articies a.re: · · .: · · · · is· not adverse to.-'that. of ·the 'depositor (Delgado~ V.
, 1, Ofthe same kind and, quality; and , Bonnevie, G.R. No. 7097, October'?3,19"12) ...
:. 2 ... · ~~e!e is ~o-contrary stipulation. · .. ·
.- .. , .
Obl_igat.iori 8: To be liat?le 'for loss· t~rough
. If: C.9[Tll'Tlingling .is -~llo'~ed, .each 'depositor shall 15e. fortuitous event: (SUDA)
entitled to 'each portion· of· the entire mass as the 1 .. .Jf §tipulate-d;.
'amount deposited ~y'hl~ bears to· the whole, 2. If he. y\~s tbe thir:ig 'vvithout _the_- aeposjto(s.
•.c-"' __ permissior:. ,' .. -. . . ' ,....,
If <the _arti_cles -d~po~ited,. belonqinq . tci~iffere!1t • 3. : lfher.Qela9,s 'its return; ~nd · .. .
depositors, are not of tre ~~me kind aniq~lity, it i,s 4. ·1f .. he· Allows other~ to use it, even though he
the duty of. the .depositary to 'keep tliem s.el?arate. or. .. himseWf!iajl ·h~ve b~er:i authorized to ys~,.tbe
;:it~~i~tf~~niifi?t:i'1e-(pE 4'EO!y,.stiPJ.~>i ~179).~. " ·. ·:~s~m,(~~~f.L_ GOfJ.E'.·Art.' 1.~79). ,_ . . · ,, ..

, , ,. 0Qligat,<w,jl: · LiaoJJit .. when the thing>d_ep<>~itecl

· is delivered closed ~md sealed (RPS) · ·. . . .
1.. .To Be~uro the thing· d_~posited in . t_he $ame-
condition; . · .. · · , . . . . . .
To
2. : .e_ay for damag~s shou.ld the: sear or' lo.ck be .
broken· through· ·his· faul't, which is presumed
unless' proven otherwise; and .. --... ' . . - .
3 .. T~·i<e.ep the·§ecr~fof the.deposit when ~h~ s'eal
Exceptions: .. 1 . . · • • _ or loc:k is· broken with··or without hiS' fault (CIVIL
1. :· Even without · the· express · permission of the ·cob~; Art. '1981). __ ,·. · · ·.-' ·: ·
',·, I .
· depositor wbenthe preservation ·of the thing
deposited requ-ire~
. . or . a . . ..
its,. µse; • · Re-~s·ori: Without the ·nile, irresponsible deposita'rfos . -
may" .violate ~heir= tru'sts:w1th impunity .(DE' LEON, .
Note: ltrnustbe used only for that purpose. . .·
', . . .. . . .
· · stipr_a <Ji
"'°:
1,91)."_ · · · · ·~ "'· ·
I '

. . • . i,
2. l/ll._hen expressly permitted by the. d;posit6r. The depositary is authorized to open the 'thing
__ (CIVIL COPE; Art. 1·~77) .: · .9ep·osite9, which ]s' closed· _an(sealed, when there.
is; . _ • 1. ~ ••

T~e. permission
. .._/
to.use isl not ·presumed •except
. .
~b._en . ·1. Presumf]d au1hority, such ·as if _the key has t5een.
such use is necessary for' the. preservation. of the .· .. ·.delivered.to.him; or-. .. . · · .
' . thi11g deposited·~.119 the. burden IS;On the depositary
to . prove. that" permission has- been . given ( C[VIL
2 .... Nece_ssity .tq .do so as,
wh.en t~~· ir:,structions a·f
.: the depositor as regards th~_depositcan'nofbe
CODE, Art. '1978J: . -., .
.' . .executed without opening the box· of.re'cepTucle,
. . (CIVIL coo'E, Art .. 1982). - . .
Effect.if Permission to Use is Given: ·
1' .. If the thin~ 'deposited is. non-consumable..

The contract loses the ~haracter of a deposit and

acquires that of a commodatum.

2019 SAN BEDA LAW CENTRALIZED.BAR OPERATIONS I 655

 Clt6:DIT.TRANSACTl"ONS·
SAN-~fDA LAW CENTRALIZED DAIWPERATIONS - MEMORY AID. 2019
±Mi-±:'»¥1:9*,&*,M&' g:_~t& H~« ,.;•;aw :sPN> w»
. ~.f#M:ii~SsMwmm~'.'?'*!4 ?A:W:? s;:s r.4@7a~ :**cU!·; aMtif:Hi·WY@PS2"%Stidltrnz1

Obligation 10: Obligation -to -return .products, 'A bank can compensate or set .off the deposit in its
accessories, · and accessions (CIVIL CODE, Art· hands for thepaymentofanyindebtedness to it on
1983). the part.cf the depositor (Equirabl~ PC/ Bank v, Ng
.Sheung Ngor, G:R. 'No. 171545, December 19,
Reason: The . depositor is the · own.er ,or-. ·at least 2QQ7)., In 'true' deposit; such compensation or set-off
represents tlie owner of· the thing deposited. The is not allowed (Cl_\(.[L COD~,-Ait. 1287). .
'products. > accessions .: .- and accessories. . .are .1 ••

consequences otcwnership (DE LEON,. supra et lrreg~lpr De~_osit~: Mutuum

191)., .. . . .

Obligation 11: To pay interest· on sums

converted to .personal .use from .the day. of
conversion . if the .de posit consists · of money The- consumable.' thing _Tbe .. · lender cannot
(CIVIL. CODE, Art. -1983 end 1.$96j: ,. .deposited . may- ·,- be demand 'restirution until
•• • • ' 1•

demanded ·at will b9' the . the time tor payment, 'as
. depositor. ·. . ." : · . , -t , pro,vid~,djn.the, contract
. . 'has arisen. --- . - .. .
. . -··

.-656' I 201\3 SAN BEDA LAW tENTRALIZED'.BAR_QPERATIONS

 . ,
. ¢R·E·orr TRANSACTJO:Ns
. _SAN BEDA LAW CENTRAilZED BAR OPERATIONS - MEMCJR.Y AID 2019 ·
J':WI# @,m:· I? c,;c:• .. \ M\5il!i'?'fl21 E ¥ffi·~§,: ¢4 .''' ::?¥ \Wt!,·$iiMUS $-q;ill WAm\ ·#N $¢Ill!* i @l9Pllt§KtaW&l,# k~~-A-18YJUffi J

Rl!.re·Wh.en There are:.Jwq _or ,M9.r:e D~positors ~ote'. Art. 1991 m~ant ~depositary's he.ir, as:-~hown·.
in Article 1178 of the old Civil Code (5 TOLENTINO . ·
sup(a at_ 468). · •

Ob.lig~_tions of The Depos:itbr . . .. · ..

1. Tc:> pay. expenses for preservation if .the
..c.!e.po.?i! i~Qf~tu_i!~~.? (9Jl(LL C_QOf=,.A.i!.)992)
-Divisitile l ~Not somr~t,;-~ 'E~6h-: ·::· oiie~ "·. airi· · (contemplates ·Ordinary_ and extra_ordi.nary
.... , · demand o~ly · · his neces~ary expenses).· . ·
•.
share ...
· ; -· ..•
_.
·
> ·
,J ·_. .
T0e law refers to nece_ssary ·eip~nsei ·u;eful
R_eg_a_rdle~s ' .. s~·lid_ary' ..·.. Th~' .de~dsitary' ca.n
expe.nses or. those_ for p1.Jre,·luxury-:9r:·mere.-
. of divjsibil1ty/ return·· the thing to
pleasl!.re-ar~ not covElred (OE LEON;-.supra·at ·.
·1ndivfsibi1ity .., a'ny'' .· qf_ . 'the · 201). ,. . . ..
. ·....... ·: ·'::.: ~ t ~-..
~ep~sitors'::. . ... . . .
Nate·: 'If · the -deposit. · is . ·for a -;\valuabl~
. , _Except: · \1,/heh
. ·:.
· ·, · · the/(f·has··-'b'een. a consideration,. ,expenses for .·preservation are
,·;·. ":'' ... borne . by .. the . depositary- ~ec~use. th!:)y°' are
...
{
· .- . dem·and j'udidal or
I .
... "·· ll;
. : ~·. ..'.extraj~d1cial, ~for -its- . deemed included' in-·the compensation, unless"
.. a·,,<· .. retiJrn ·~has'. . tie en · there is a c0ntrary stipulati?n (Id: af'202)~ . ....__ . ·
.·.: . . ...... . . . : ~:
.made' ,:by.· one 6(
th'eiri ... _·,; ·, p1yment · 2. ·. To pay for losses incurred by the depositary
.. shoUld·· be. made to . · · d~e to the character_.of- the thing· deposited·
. (CIVIL CODE, Art. 1993). :. . .
· J1ini. (Cl~IL CODE,
Art,),214)
' '·'Gener.al- Rule.:- The depositor 'shall reimb~rs'e
. -:the cleROSitary for any loss arising 'from ttie
' . character. .of the/ thing deposited_ (DE -, LEON_,
. ,· /.. :. -· ~u~~,~t.20~!·· ... · · _· · . ·_· . : ·. ; .· .. ~·;_-
Exceptio s:" ·
. · At tfie time o}.the deposit. the depositor was'
(CIVIL CODE, AtJ 198p):._ n~ta_~a~e-of·the danqerouscharacter-of.the
. . . . {·.1 thinq;' :J .;·· , · · · : ,· .:.- , ., -,
N'~te:. l_f there is ·;::i- s_ifp~lati-~ri)hii tH/fnj~g ~-hould -o·~pqsitor was. not .expected to "know the· .. ·
. _ be _retu_rn~cl _to one bf, ltiE:_'~ep_osjlqfs: tpe'.deposit~ danger.OU~. Character of. the thfniJ; .. ·' .. · . ·. . ·
~ti~U return it .only to the person qesigJited · (9/VIC. ....· Depositor ·notified the depositary ·of the
_e.ODE;.'Art. 1985, par. 2). ' :- -, · , . ., · · . sam~; a~d . . . . · , , :_1 --~· .: .- •. : ·
.-.. · .. ;: . . . · · · . --: ' - . d. , The depositary was=aware · of it-. wfthout ~
',d~p'osi.t~ry's'Rigt{tof1 ·Ret~rihon.·: -: (. _.· , . . - .. ,, < · ':
~-<:1~Vi~e1 fr'~!)) the· d~pos_it(2r ·(CIVIL COD_E, .
The _d~_ppsitary ·ma/retaJ'~ 'the: :t~in~{ in·'·p_l~·dg~ until . · Art. 19?3).·:· ·' : '· · .. · '.
ftJI! . P~Yn:i~_n!: of_ ":'Mt ~9y. l)e due.him by reason of
0
. . -· ' · ·, ·•-. · :' · · -. ' . : ·' .' ', .' • •

t~~·.qep.<?.~lt (c_:;{V~L__c;opE~ Art:_ '19fJ1)·.,This grticle ·. .Ext_mgu1Sh!'l1e.nt _ofyo1un1~ry·Dep9s1t ··\ .... : .. ·

giv_es an ·~x~mp_le of'p_ledge ·c_r~atea ,by opE:lr~tion of'. The ca_use.~ _ar_e .Sll)'ltlar to, .tliat;-of the extinguishment . ·
· law (BE LEON, ~upra a.f 202). · · · ·. · ·· . -' ._-.. · ·of ,.obllgat1o_ns· 1r.1 ··Art.·, 1231-. -of tlie CLyil : Code: . :
• .· i · . . · · · . , . (e~-RAP~MNLF) ....a;·.·· .. ,.:-i. ·: ., • :. :··.:· .
. . Rul~~ vyhe~.·- an· He/r:..of'the; i;:,e.Jositot s·~·,ci tt:ie· . . . .1. .E.~Y.r,:ie~t ~r Pe_rformanc_e'; . .
. · · Thi.ng·Deposited ,· ~ · · ,; · . · ... · : _ · . 2. · BemlSSIOffOr Condonation; .. •\- .·.· ,
t~1i.c~fP.~sfi~~·s·~~\r,_~n·o in g~o{;(f~it11"/1~ay ha~.e·sold : 3\_Be.~~is?ion'. _·:'.· .. - .· · · · ..
th\'l thing
·only._ be: bound'·to; retaf.ri· the."price· lie \may have
9
w_lJ1.ch .~e- q, n_ot ~.n'?'v'{..W_~.'S d¢JJo~iteq,· shall . .. 4. ~~flul~e~t,:,.
.. · ,_ 5 .. .E~es~,npt1on, .
·• ...

. •,
. ·.·
·i
I -
rec'eiv.ed· or to assign'. his _right qf ~ctiori against tti·e . ·, 6 ... M_erg'~'r: or- Gonfusio_n; . './ · s· .. I
'buyer .in case the- ·Rrice has nd!'. bee~1-i;>aid to· him 7 .. !iovatipn;' · : . · '- - ·· / ..
"(¢1v;1fcbbE, ii.ft. f9?J1;:,.·.··.:·-·'.'·· · - ·.· .·· .··, ·; · . 8:. ·_boss of:th~-thing due;·and · . , ..... , .. ., .i
. ·:· ·:' ...\ .. -·· ... ·,-, · .: .. ·,.. ' · ·-' , .' . 9. ful.fillment.of.a r~solutory·condition.·· ·-.· · .·
_Re.a.s:9}1: 1' • l;q.w,ity
... ' ... ; : • .. • • • • • • '·.·, ••• : > · . ' ·. . . :. · . · . -~ : ' ·
.. , , ;· .. · .. ;, · . ... _. ·., ·-. :- /-· Not~:· Corl]peAsation as tncide· of: extinguishment a
If th~ heir acts. in. bad faith, he is liable for dama!ie's: of obligations _is not applica~le to deposit (DE.LEON, .
The s~le or appropriation 'of . the thing d,epqsited. supra -~f 203). Compensatic>n is not proper when.one··
constitutes estafa (DE LEON, supra· at 199) ... · · of the: debts arises from a deposit or from the
' ~ . . .

. 2019 SAN SEDA LAW.CENTRALIZED BAR OPERATIONS 1-657

 SAN BEDA LAW CENTRALIZED BAR OPERATi0/1/5 - MEMORY-AID 2019

obllqations of a depositary or o.f a . bailee in 'Note: A_ deposit made in cornpliaricewith law.is

commoaetum (CIVIL" CODE, Art. 1287). , · governed -by the provisions of such law and, in
. default thereof, by the rules on voliintary.deposit
A deposit is also extinquished: (CIV_IL' (;ODE, Art. 1:997, pifr. 1) .. · .
1. Upon the loss· · pr destruction·- of the thing
deposited; 1. -Made on the occasion _;ofan"y. calamity suchas
fire, ·storm·; flood, pill;:ige;. shipwreck or ." other
2. In case of gratuitous.deposit, upon the death of similar event {CIVIL CODE, Art .. 1996 par. 2).
either the depositor or the depositary {CIVIL· This is referred to as involuntar;y bailment or
·cope, Art. ·1995); involuntarydeposit. Another na~e is depositb
miserabJe (DE LEON, sµpra.at.206-207). .
. - ··..
· Reason: Gratuitous deposits are personal in . . '

Note: There must be a causal rela.tion between·.

nature
. . t:EON,. supra at.. 204).: . .
. (DE
the calamity and the constitution.of the'deposit
Deposltfor Compensation (Id. at' l07). . · " . '
A deposit for compensation is not extinguished
by.the death of- either-party'unless-thedeposit is : The-d~_pcisit:mac;Je ·on anyof the- said.calamities
terminated _by the-hetrs.of-the depositor. This is. shall .be requlated by the provlsions concerninq "
- . 'different -frorn the rule in gratuitous depo~ . voluntary.deposit and by Article-2168, i.e., when ·
whic~' are personal in nature (5 PARASfl"supra · r
at 957). · · . ,/"' ~ . v1 1.}\_y -,aur.,ing a calamity, property is. saved- from
~estr ctiofl by another person without the
,' -· . .: '·:. '. /. Q
3 ..' By:Jh_e. return- of. the th'.ng. b¥<,~~t:··--~e
ositary . , ·
r.~- . . .k.[l~•\f~ge _of·tt:ie owner. the "i,atter is bound to
pay the: ~o ~e~u~t c~mpensatioi:, (Cl~IL CO~E,._
.-: , _(CIVIL_CO{)E,_Art198.9); -Z ~ · ~~ . ~-1~~ Par: ~' : _ . ·. , ..

_
4 .. By'the. conversion _of a:fi~ .
lnto a_nothlW'
· contract if the depositor ~ILows.l,e ~~pos1tary to
i
rv·~
_%ther Jtn~~~f'- ;c)ssa,ry.'-~eposit~:.
1. Dep9s1\s Mp~1th_ Common Carriers:
' ,

· ·- .. use the th'.ng (CIVIL COf~t

19'.~). ~ ':~-..,. -?~_ep0sit _by ,~!irs in Hotel~ ~nd lr1ns: ,_

.. N~te:· -The, ~au:5es menfo{~<tJ~ , ..rticle \995 I are';\FJJ~~ The ~~~_Pet;•0fl io~el~_ ... _or;. inns .. shall._ ·be
~~T excl~-~1ye (DE ~E?N, sqpr;;i. .fi\2p8~.
~). · :.::-·· ~~· rest&.,e,§}bl~
•a~ 9<;~os1tan~.l>- f?r
~h_e.-?epbs.1t o~ .
r\ .· ~ . ".'~ Hi"" e1fe l§;ma,efoy'"t'.avelers. - _. .
..
·Necess~ry Oeppsit
. ...
· ·.
A d~pos1t 1s necessary when:
. . <
V.-' , ·.
·-
:.~A .'4-y :'
L.. "-~,J Et~
:(D)
~ ~:~-
ent_s,.:
,:,- . ·. ·> : · ·. · · _ · ·
· · . · - : . . .

, (~_/VIL C~DE,_ A~.1996 P.ar.. ·_ ;._ . SczEbrt\h. _ · . e • plo~eE;J pf t~e- El_ffE;i_cts. br_ou,g~t. ·~,Y, the
· ..
, ... · .. . . . . . . . .7. .. gyest~;.]11d . ,. , . . ... -•
. . ._Exampl_e~: . . . . · · ~· . . ·-<'_9/)-, - b:'\~~~.;(srfaRe · the ~-!°~~auti?11l wliic~. ~-aid
a:_. · Ju~Jc1~J de~os1t ?f- a ·thm_g -t~~ pes~essi~ of -·Mr i\:t,t~~t~f-ke~~er~ o~ their su,bst1futes ~~v1~ed by_.
.·• . · which .1s bemg,~1$puted'm-a h\!ga~b~the1r ~elaliv,e_ tp _t~_e. c;:are.:.a_[id.'"'..1~.!1,aqc~r.9.f
or ~ore_'pers?ns. (CIVIL ~ODE, Art,_ 938); . . . th.eir eff~cts.,(C,.Vf~,GQDE1:flrl. 19,9~)., ·
. ·b. · :oeHo'~it y,.,ith_ a bank :or public institution .of · :'-. ·· · :· .. · ·., O, · .. .. ._ ~-· .. _ ·. ·, ' ..... : .:
· pu~lk: . ~on_ds· ·. o·r ··'ihstrun:ient~ · ·of, e:redit. )_l)is· als_o)~P.plie~·- ~9 the passe11g~r·.s· ~a~gage
. _payable·to or~_e·r or, b!:fefr,e_r. given in·us.ufruct w.h)c~.is· i_n. hi~. personJil custody._(Cf:V/L .90D_'F_, .
, wh·en-the usµfr.uctuary qoes notgivEJ proper · Art. 1754). · ·. _ .•. · . · .·i· · . - · : · ·
for
-securjty their con.servati'o'n.(GlViL= CODE; . .· ·. . . .. .
. Art.586);. · .··.: .. _ · ..... , , . "Tr~yelle~s~'·anc;l"'.°gu.est_i('rett:i.rt~.tr~_~s1~nt~,~h_o''
c.-- Deposifof a· thing'pledged wrieri'.the creditor - . enter hotels or \rins.se~king lqggi!'}g, arid'.not to
. u~;e·s the s"aQle.wUhout ,the authority of the: boarders in dorni_it0ries anc_l lodijirig l:)ot,1.s~s. wpo- ·
owner·or misu_~es it in 'any' othe[ way (CIVIL. s~-l~~t. their:· b?ifrci.er;s_'_u's_u~lly f~r. :~. cpnfr;39l_ef! . .
. . CODE, Art.' 2104); . ~ .. . . period (DE LEON, supra a( 20~).
· d'.' _Dep·osits··r~qui.red in:suits as.. provid~d.in-thE:l -· · ' · ·, · · ·. , ..' · : · ·· ·. · · .
. . ·Rl)les of Coi.frt; and,: ' . ; . . .· ' . 'Ex_teni"~f
ii~~i!ih1 · .. ··.·.:. :' '. ·)··' ;:·.:-.- ·.:·. :-:_·- .:
e. Deposits CQf!Slitut~d to guarc!f)tee coi'.itracts · Noflimited_ to bagg,age·or a~ticle~ ordi_r:i<?rily',used
. wi_th, th~· gove'rr:iment.. The dep.osit arises ~y tra'velers. It also ·e·xten.ds to vehicle~. ;::uiimals
fro in an obligatio_ri of P,Ubli_c O( administrative arid articles which' have been introduced. _or
,, character (DE LEON; supra at-~96); . p!aced in the annexes of the hotel"(ciVIL ccSbE;
.,, .'Arf...1999) . .'.· .. ·::,.

658" I .201~3' SAN BEDA lAW CENTRALIZED ~AR OPERA TIQNS · ·

 CRE.DIT TR.ANSACTION·S·
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019

A hotel-keeper .is liable iii the · following Right of Reten.tion by Hot~'l-keepers:

instances: rhe hotel-keeper ha_s·-a rig:fit to ret~in' the thin'gs
When· the loss or injury is caused: . brought into the hotel b.y)he gue$1, ~s a security .
a. Byhisservants or employees as well as· by - . for credits on accoulif of'lodging·, .and .supplies
·-strangers provid'ed.that the notice .has been · usi.J~liy furnished to hotel guests (CIVIL ·CODE,
1
given and proper precautions ta~en;.and .Art. 2004). · ~ • ' • . .
. ·-.· . . ·.: ,. ~ .- ,
· b. 'By the act of a thief or robber qone _williout
the use of arms and irresistible force, tor:in .. ·. .·;, · · R~~~on> The r_igh~ i~ giyen--to. hotel-.keepers to·
'this case, the holel-keepe·r is apparently :. . . :..compensate th~m dor. th'e liabilities . imp,osed
ne'gligent (CIVIL co6E, _Arts. ·2000 & 2001): upon tne,:n
. ·
by.Jaw.
~ (DE
. ~.
LE;ON, supra at 2·15).
.J
. _A hotel-keeper is NOT liable in the folro~ing Note: A safety d_eposit:~box · in 9 hotel .i?: a
instances: · ·. · _ contract · of nec;:~ss'ary · deposit. ,. The existing
wf-ien th.e 1oi~or injury is caused by:. -~ ... . .. relation_sh.iP. i~_.one of depositor' anp deposit?_ry
a: · Force inajeure, theft by a· s.tranger witfrthe ,.· . ('YHT'Re_aJJy Corp. VS CA( supra.):··. . ·. -. '·
. Lisi "or· arms or imfaistible · force (CIYIL
· CODE, Arl.2000), unless he is guilty of fauit ./
J.U:ciiciarb~posif.. ·,
'· or nl3gligeoce
::..,". .. i,n . failing to. proyide
. ag~inst
. the o~
Judicial c;leposit- .sequestration. tQl<es place when
loss or. injury from his cause (DE LEON,. an attachme'r1_f dr seizure of property in litigation is
supra· f:]t-211); · · . . of.dered (CIVJL CODE, Art. ~005). .. . . - .. · .
·....
b. 1he 'aets of guests·, his family; .servants ...b.r
visitor's; ~ind-· : . · ·=.·>,. ·- .• · Movable·· as well as imm~vable propertY:rriay be the
c .. The·. ch~racter of' the :thin·g·s • (e.g: -'it is . object of s_equestratio'n (CIVIL/CODE, Art. ~906). .
. consumable) brought into the hotel (.Cl'Vif..:
- . . · C.(!DE, Art. ;2062); :. . . . . -~ .. The d_eR.9;,1tarw 'of property or objects sequestrated
cannot. be relwved of his· responsibility until the .

t ·:_·,\ . . · · - ·. . · . .
· c_orfrov,e~syli,H,ch,gave rise !~er~to has cometo ~n -,
.· : Rule.in the occurrence of theft or:. robbery .
. -~ . Th~ a~t qfa ·t~iEici(rc;ipber,· "Yr\?.t.a; lilt~d_.i~e.. . end, unle..s$·. tlne\~urtso .order$·(CIVIL CQPE, A[(.. ·
: ,re · _hote,l ,.1~ not d~.emed.(orce mi!J~ure,LfDte 1t JS_· 2007)
. · done-with t~e ysfl of arm$· orrthr9.4gh lhe~istible-
force (CIVIL CODE, Art. ·20<5''1]:_,,;;.:_ . ... Th~;d:po§:,a~'Of'pmpert/ seq~e~tra;ed_is bound to ·
. _comply, w,m~ect t~ . t~~ sa~e, "Y'th ··_all the
·.,-Rea.son~ ... Th.~ 'irmkeeper is ~bound- 0 ·. e~p his obiiqations of a gc,od father-of a family (CIVIL CODE,.'-
. ··: house safe: f~oril the in!rysian··<'U ·t~_iel}e and/ft . _.Art: 20.0?).. , . : · . · · . '.
· they areallcwed to gain access t~~).Joµ;,e.;· ·. : ·. : '. .: . .·., .: . _ . · ... , . . . . . ·
without the use-of such forte as"tll _showiit~ As_to~matlers·-ncitprovidedin the Clvil'Code, judicial .
. marks upon the house, it is' fairl,rpresumabl.e. .sequestratlon shall be qoverned by-. the Rules of
·:that the innkeeper i? at fault {5 PARAS,,.sugra·at . . · . ·Court··(CJYIL CODE, Art. 2009) .. ·.
:_9.: 64)_. . · . - ·-·~· . -: · . ·..• /. · .. ·.. ·'.. - ,, . ; . . -"··· ·:--.· . '... . . . ~. ;.
-
. .
r,J_atu_re. and.Purpose, of J~dJcial Deppsi_t . . . ,
E:xe~ption-or.-Dimi.nut:on ot ua6i!ity: . · · . · . The_.~eposit- js'judici?.I because it.ts _9UXil\ary 16 a
:The hotel~kee·p~r cannot free himself frpm·:the. · · :: caseq~ending ln court: .- . ·: : : -~ . . . ' .': ,; .: .
responsib_ility by p~stihg notic_es to.tti.e effefl.that ..
. Thepurpose is to.malntainthe status quo du_rir:ig the
·, J,e i_s· no~· liable for th·e article~ ~rougbt by· the. · ·
· pendencyof the-litiqationSrsto insuretheriqhtof the "
guest: Any stipLilc!tion·to such effect shall'be void :
parties to the property in 'case of. favorable judgn:ient
(CIVfL COD~,. Art.. 200J). · . . . . ..
· (DE 4~oN;·sapi-a ·at 217)> :::· · , . ·. · ~. · ., .
:- . . ·, - . ·.. . . . . . - : ..· .. . '. .. . ·.. ' ' ' ' ·~r• ~ .. ,· • .'' ,' • ,~· '.- •• • •

,, .. ,;, Reason:: Public: policy, The hotel ·pusin~ss ;is·. ,

CustodiaLegis . . :·' ;: ' .
· . :Jmbued.\vitn public interest (YHT, Realty Cqrp. y: ·
- CA,. G:R. No.
a
This· occurs when tl'ling:is_sho.wn to have-been arid
. 1.26780,
·. February.
.
17,
.
· 2005):
.
. ·. :
. is·.·:subjected fo. the 'offidal.'ci.istody qt
a··juditiai or.
. . . executive officer in pursuance 'ofh.is exe~·ution of a
~ate: It is not r:iec~ssary i[) order fr, hold ,afl inn- .. legalwrit (Id. 211y" at · · :,·.
keeper liabl_~. thar'the ·e.ffects of t~e guests -~e . .- '
actually delivered to him or hi_s ·employee·s; .It is· .
. en,ough.tl:iat··they are: Y{ithin· th-e inn _(D~ Los · .. ··. :-,,
Santos-v: Tan.Khey; 5[} O.G. No. 45-53;:29 Am: ·~ .
. Jur. 89-90, .fuly 30, 1962J: . .· .. ..~ .

. 2019 SAN SEDA LAW CENTRALIZED BAR OPERATIONS I :659

 CR·EDIT TRAN-SACT-IOiNS
SAN 8£DA LAW CENTMLIZED.BA;ROPERATIO;;S- MEMORY AID 2019
\ .
'accessories inJ;luding ju_dicial costs (CIVIL
GuA~NTY· CODE, Art. 20q5, per: 2); .
·.c. Specific =.covers a particular obli°gation; or
·{1-\.RTS.~
. -.. ..~04'.7;-2.
. . .
.
0.8LJ).
: d. .Goritir.i.u[r.g_. - covers subsequent .or
.additiona! obligations. (C!Vlt. CODE, Art .
. _2053). · - -

660. i 201s s.t.fi ·sEDA.LA;f~NTRAUfED BAR OPE~ TlONS .

 C~RE·DlT T-RAN.
' . S. ACTto.. . . N:s
. . . SA,Y BEDA LAW CENTRALIZED BAil OPEllATIONS - MEMORY'/\/0 201~ : ~ . r.
e;;g;ga&sW2 @':fi¥W?i4iiBSii!:iiztt w,•;w w :ws u&o+n·+ . e&&s :ZW&d&Me,-s,,:@ "'!ltllr:-..,,..,..,_..........,'""""
st· :•v;;e r4PAW •:?ai V#C
. . . ·.. . .. ' ... · ..' .. . ·,

assumed by the surety (F.<3U Insurance Corp. v. ~ . · Note:. The creditbr may.sue the principal debtor
. Sj:i'i/-Roxas,· G.R. No. 189526 & 189656; August 9, and.any 'of the sureties separately· cir toqether
2017).. r · , '-· . (Na(ional Shioyerd and Steel· Corp .. v: Totrenio;
.. ·G.R. No·. L~2-110_9,·June 26, 196·7-): ··
Natureof.Suretyshlp's Undertakinq: . · · . · · . ' ·. .:.;. - ·' ·· . ·i · · · .
l. · Liabilit:y is contractual and accessory but dir:ect; In 'suretyship.; the oft-repeated -rule is that-a
· -, ' surety's liability is joint· and solidary wjtH' that of
Although the contract of surety .. is. iri essence . the .principal debtor:'Thjs·'undertaking·makes· a
secondary only tcta:_vaJi<;l principal obliqation. his ··. surety' aqreement ari '· ancillary contract. as 'it
~ liability. to -the :'credj!bf is 'direct,·- primary and presupposes' · ffie existence : of )·8 :, principal·
· -. .absolute;' he· 'becomes liable for the debt- and- · contract. Nevertheless, although the contract bf ..
duty of anether alihoug):i he possesses-no direct a .surety is In-essenee.secondary onlytoa yali~
.... or personal' interest -over Ihe obligations nor . principal obligation, its liability/to· the .creottor or
,. does he receive any
benefit therefrom i(Trade 'i "promise': ofthec'princip'al .is, said. tobe- direct..
· and investment Development Corp. of the Ph ifs: · ,:primar;y .and absolute: jn other, words, surety is a
-vs. iisia· 'Peces · Corp.,- G,R.-· no.. f874_03,. · .c. directly andequally.bouno'with theprinolpal. He.'
· ;:: .'February.f.2,,..;~p14): - ·. ;. ' . ' .. zs , '. / ..... · . becomes liabJe:'for:ithe debt "and 'duty' of· the
· . · · · ' .. · ·,prindpai-: OQl!§Or,'.;even· 'Without possessing a ·
. ·. , : ~cite: bl~nc~;~b~i~g'. arj_;~c~essory.,~ont;a~t, ~n·. - direct ·qr
pe'rson?i· · i1Jteresf.'in the. obligations.
, _ .· exte·nsior:i 'gr.a(l.ted by_ the-.credit9r_ to~ g~afaQto~ co_nstitutec;f.by._the latter.' l'hus;·'a_'surety-i~ not ·
; · . with.out theh::611.sent of debtor's- surety, does not . entitle~Uo a·;separc~.te. nqtice of defai.J_lt or to .the .
. ·. . · extinguish :the ·surety (Trade and Jrives(ment: .ben.efifof.:excuss'ion,.'. It "m·ay iri' fact: be· sued. ·
developme{Jt, Corp: of the F?f!ils.. ,V. (1.sia P.a,ce.s. se.par_ately, o/-';t,ogethe'r_with t.h~ pr.in~ipa1: tjebt<;>r
· .. Corp.; supra) ·.< ,_ ,, .. (G1/at Satel[lte•Networks, L(d .. v. UePB'G~neral'
· .. '.; .' .. · · ·. J . .. ... ./hsuranee·OiJ.,';.'fnc:;··.G.R. No: 189563;.·Apfil 7, ·
2 .. UabilitY. is finiit~d -~y- ~erms·,ef contract; ; . :.· ~0!4).. · 'i._ ·:/ : :. ·. : ':. · . :·; · . · ·~ '-:- -~_·1 • .

"<A_. cop_trad. ·-~f .·suretyship j~·- .not Rr'~s'tlmed;')t . ln~;h~.:~~ie~~:Qf_ ~oJlusio~ •. !h~.
~W~t~ :i(b9un~
: , ·-~annqt-.ext~nd to··mcxe--~~an_ wh~t is s'tir.ulat~id . .. by aJutJgment against the~pnnc1palidebtor even
·: ·, :··:,' :w{sayam-S.yrely;&,Jr1spranc:J,Corp. v.,.FA;>G,R:. ·. · ·, ·.thouiiJh;:he·. was:rn.ot(a>p9rty:,:to, th~1prqceedin·gs._::
· . ·· No, 12,:726.1, September:-7', 2001). -- · . . ,, : .. · ~6.<?tu.5lof its ·u.n~ert'?~in,~ri:r·ak·es it.privy.to·all
· · · '. · ·. :,, · , : :../ . · · . proceeclings- ag;iinst,;.:its. prihcipal . (Fiilman
. Cr~·dit~r~;· how~~er,. ~ay reJb;er trom1ne ~µrelY. . Generali...Assura(!ce potp. v. $a/ik;. G.R. · No .. ·
-· ~s; P.art p_f ttteir .d?rj)cig~s. i1{terest-~t he iegjl. · · 84084; Augusno; 19~0). . . '
.rate, ·even if the ·surety would. lflere'b'y become· ,; , .. , :· ": · <. ,.: :--: .... , ·. - · ·,: ,, ~!-•· : · · ., ... :·- .
. :, :/?6'.~ ~t_~a_.~ ~°.r~t~~-·the .aMo:untt,6.1.~(ed. 4.
1su~~i;.·;s
ntX~ntiti~d:t~·:u~-~ benefit ot exhaustion;·

\ .. ,..Reason: _NP! by-.._reas_o~ oJ_ c,;o~trag,t,.. .,P}l.,t ..bdliiy;..·~""""'-,.1

.. ·~·:-.~
.. , ....~....,e..,_'...ao-'"':·
.n;.·;·u;~~;.:~:s;~meJi~/~:~lid~:~~;1;_~~\1~yfor-
. re.ason.of'1ts'fa1lur"e_to pay whe!l dsr(ianc:J~.'.,and. . the fuifii)m,!3Q(of the prin~ipar obiigatf.o.n:(rowers
for 111:iyirfo compeUed: th.e plainliff:Jo, res9rt·ia 'the:~ . ·. Assuraf?Ce C.o(P~ Y: Oro'rarna SURermart,:_'G.'f;<'. · -
. coi.Jrts ..to obtai.n payment(5 TOLENTIN6:~supra '.. ·. No.·L.-.4!58'48,·.Novj:Jmb_er_9,.·t.977)... ,. · ...
:~. , :lt.'~?~!/_ -~ · . <<: . : ·:,~-· _ i,.·~.· ~::_·_. ·. : ·. ·. . 5, ·,Undertak.ing··.is to~th·~·tr~d;t;/a·~}~~\~o-.d~btor:;:.··--.
, . .. · -.A s'urety,.. bO\Neve~,, is ·r1'0t'relea'~e~f by,'.'a cpange. • · .. -i·· ·;. )'_: :. ·. ··.: ':. ' . ' ,' . . I \ .:~ :' · .. , ') • ·.: ••

., · .... · ir:i t~e.'-~9.ritragt_1,yni,ch doe.s· not have:.th~ e.ffe'ct cit·. ·i .- '.:·Unle~s.qtherwise .e:xpre.ssly.proviqed,, tAE? .surety
· ',: ·. n:i?.king ifs: obiigatioo more,.oneroLis' (ln.tra~Strata . , .. m9k~s-;_ 'no,
coyi{ra~t Qr· ,agree111ef\t: WiJh, · the .
. . . ' . , .. ;_ i[\ss_~(f]hCe C,ofr(V~::Rep,ublic~o(the Phifippines,.. principal '.that.,: it;' ::.wil,I ·. ftJ!fill· :,th,e. . ,Qbligation
. · .. · : G:R. Nb. ·156571, July ·9, .2008). · ::·, · . ·. .· · · · .. guar;,uJteep. f.qr:. th.e _b.enefjt of the priricip'al (DE
'· · ·. ·,,.,·: · '. · ' ·· ,. .. 'LEON~ sup,:a._at-294):.: ... ·· .. · .. ,/ ·., , ·· · ··
: 3. ·.:.Liability .c;iris;s. only_ if princip?l.· .debt6r is .he1d· __ -r·_ ,, .. ·.. · < ·. . . . . -., · .· ... ·>···:- . . . , :
.. : ,_li~blf··. ~- ':--i ·. ·,, :\·.:._- .· ( · :> _:··\, . _.\..:' . ff,· Surety.is ·not,.e·n.fitied·_t.o. n_otice .ohpr.ih¢ipal'.s ~ ...
' ·aefault; ·. . ··\ ., .. : •. ',:· : .... , -.. ,.· .· ·. : - .. ._.:
'1t th~· pri~cip~· d~btor ~·nd· surety. ~fre h~1d"iiable-, .....
. their liabili.lY:~P J?.cW,ttie ,creditOr:;WciUld.be.soJidary . R~.a_son: The.~urety-is };:iou·nd to tc1.ke ·n.ofi.ce bf·
. but the nature ofthe surety's underta_king is ~ucti th.e; ;;princ.ip,al)~: d$fault a.rid. to· .·perform , the ·.
-that it ~qes .n9t incur- !iability .unl~ss arid until' the _ obligation,(ld _at'295) .. · : ·;
. pr-inCipa1_,deqt6r:}s.he(c!.li~ti1e'{Gov~rnment.'~(the·
'Philippines ii. Tizon, -GR. No. L-22108,'-Augi.Js(. i _,' ,Priqr;de.rn~~d by' th~,,~;edito.~ ~~on .~h~ p~i-ncipal ._.'
30, 1967). - , is,r:i?t requi:e_d (Id: a1_295); and ·

I".

. 'ems SAN BEDA tA vJ CENTRALlZED .BAR :oPERA TIONS. I 661

 • . . SAN OEDA !,.AW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019 . . .
-;~~,m•\t® 1 t¥:?¥t EA', s,wAti s;;aw w::;;;u:m,,, sc:1a;;,eu»«:i1A!t £R•bo,:SC-a:,P->
4 :21§£tfe;;:; '4, ta ,,•:<t es• 1 < w Si l.!At-ti ·

, Note: As ~oon as the··principal is in default, the Note: A guarantor {Tiay bind himself-for less, but
surety is likewise fn default (Id. at 295) not for ·more than the principal debtor, both ·as
regards the amount. and the on'erous nature· of
8. Surety is not' exonerated by neglect of creditor to the conditions, Should he t,ave bound himself
sue p'riricipal (Id. at . 295). for m_ore, his ob!igatiohs shall be reduced to the
limits of thaf of the del;>tor (CIVIL CODE, Art.
·Reason: There is notning to prevef\t the.creditor 2054). .
from proceeding againsrthe principal at any time
(P.almares v: CA', G.R: No. 12649_0, March 31, Security of-~.Condition~I Obligation·
199(}). . . A conditronal- obligation may also be secured
(Magdalena Estates Inc. v. Rodriguez,-G.R. No.
Sureties do. not insure the solvency of the L.-1-8411, Oec;ember.17, 1966). This is be~ause
debtor, but · rather the debt itself. They are it i$. ·valid an(binding ,just like a pure one (OE
contracted precisely to rnitiqate' risks of non- LEC;JN,supra. at 317) .. ···...
performance on the part of -the obliger. This
. responsibility necessarily places .a surety.on the · · . ,If the." principal obllqation is subject to a
same- level as that of the principal debtor. The suspensive' condition, the guarantor is liable only
effect ls-that.the creditor is .qiven-the.rlqht.to after the .fulfillment of the condition,' If itis ··
. directly proceed. to either . principal debtor or
surety. This is the reaso~ why· ~~cussjon. : cannot
be i_nvo:ked . .To require the cr.edito~~ifr<?c~d,to . 1.
u
. subject to a _resolutory_condition, the happening
.A·
Tof>t~ condition. extinguishes both ~he principal
·v.
obliga io.ill.and·gua~anty (Id: at 317). .'
ar~_1trat1o_n would -~ender· ~h_e ._vfry _essel)..ce~ -. ·· ·./. ./. X: . .: .
suretyship nugatory and. a1mrn1sh · 1 ~,,ialue rn . ~-- ,Qnrlateral b~cause: · . _ · . :
com~e~ce. At· an¥· rate, a;.f~~,;e"'held-i_n ::sf'.. - a. li-,orJ.ttgives rise t_o a duty on th~ part of the
Pa/mares v. Court. of Appew._s "1f tn_e s~ty .J~ !k" W ~guqrc)nto?in relation to the creditor and not
dissatisfied with the degrN~ pf. a.cti{ity display.cl§' ~ /&. · yi~~ .. v~~ al~qugh after its fulfillment, the
by the creditor in the p~_rs~ ofHis prirfcipal, he ;;i/ .. ~ wincipal~e43)Q.r: becomes _liable to indem'nify
r:nay_ .. pay. the · debt ,..Jjii~ef and ·psecorne . ,ill! . ,~ ·tpe- guarar~~pd. a_t 283); and ·
__ subr?g~ted ~o·~II the :i~tS"a~g; remedies of. 5~~ , r-~' ~t:>. il
r:nay ie _eqtered _int? even. without the
Ltd. \.,-Umfuq,~ _lg{,;~
~r.ec;l1to~. · (.G1/at ~ate/[1te~'Ne,,.twqF~s, · ·· rnterveQtr6[1 o~tt:l'e principal det;>tQf,-in which,
C-~~onut'flau~ers.. Benk Ge~e[~I. ~~~~nee Co., ~!g.- . · ~
ArtJ: 12~6 an9 1237 shall apply (CIVIL
. lnc.,._G.R. N~. 189563_ Rc:t'Yt,on!;_P~,o~r!r . \fl)~·
7,2016).,
.Characteristics
· . ·· · ·
of. duarant~· a~-d. Sure lfsf'liQ:l!J, ·
·t.P~\~G~· ~
fLGQ.DE'./H.«050). ·. ·

~: ·:~~' .. f~_t;/_.~orit;a~t
· ,i,::
~ila·t~ral:·. if
.
.'fJ .
is. ·
. ·
(ASUN-.<::256) t · :· • ..... ~ · . ·; ·{:8, . ~- :·.~omp_en_~a~or IS -paid _to the guarantor (D_E,
. ',,
1._ ~?ce.sso,ry- it cannot exist by itself. Jpere '?nbQ~
~l:sQN• .::jP,:-a at 283).. : _ . ·
P/
.. · 205?):: ... : .. ,, :·- <. ·:
: · .b~ a·VaJid principal oblig~tion (CIVIL·43:00l~q4'rt~v,(\:
~UJ. -MAt·re,, '. ~,.: · ... _.:. _· · ·. · ·
If .the- principa·r obliga~i_0~:is -~bi9, th~ ·~u~S~~onsen·s·u.a.1; : ·. ,._. ·. : .: ..
also yoid (DE t.EON, supra at 31Q). . ." , : . · . · · . . ' ·. . • ·
· , ,., · 6. It 1s a fontr!3ct be~~en the gu9raator or surety
·.· Tl:1e ~cinsideration whic;h suppo"rts the obiigatio~· .. ·. .· al}d 'creditor.·(Jd. at 285); . -
. as to ttie principal ·deqtor ::is .. a sufficien"t . ·· · ·· · · -. , · · · " · · ·
. conside"r,atipn . to··. supp.art: tHe ·ob.ligation: of a. . . :·. Not:'e: The. co'htract·'exists~for-th~ b;nefit of the
guaranto_r o_r sure~y- (Id. a_t 306) ... ·. · ··. · , . ; cr~.9i_to(c;1.qd_,not fqr the)lenefi.t of the principal0f . 0

debtor who is n·of'a party. to. the. contract .

_gua.ranty. · ·
N_ote: _Guaranty mqy ~e.coh_stituted,to gu_i:jran\ee
the pei:forman~e .of a_ voidablfl· cir unenforceable .
c"ontr~ct. It may ·also. g·uaraiitee a ha.tural . !~'natural obiigatibns:'the creditor may .proceed
obliga~ion·(CJYI~ C_ODE,Art. 20,52)_. However, it" • · . against: th_e. guarantor although he has no tight
n:iust .t?e c_oriside~ed. binding only if the guarantor · · of action aga_lr:ist tile' pri_ns;iP.cil debtor'(ld.' at 313j.
kr;iew ".tb.e aefective character. of the· principal
•

. .
• • • :"!, • •

7. _Falls _ur:ider the :§tatute.of Frauds;

. ·- obliga~i{1n._(5 TOl.,ENTINO, stiptci.'?f'504).
. . .. .. . . ..
2. §ubsidiary, an.q ce;>_ndjtional·-·it takes effe.ct-or:11y·.- lt· i{Q_,qt i:ifesu~ed .cl.rid "must. be in writing to be
when the 'principal ·aebtor fails iri his 'oblig'ation, enforceableJCIVll CO.DE,Art .. 140:J, par.: 2 (b)).
· ,. subject to a limitation (DE LEON_, supra ~t-283).

662 I 2019 SAN BEDA LA.WCENTRALI.ZED BAR OPEAATIONS

 •CR.-EDIT-TRANSACTJ.ON·S·_
5_AI'( B~DA .IAW CEN_TRALl~ED BAR OPERATIONS - MEM.ORY AID 2019
l~!Z..:li@©Pl!!it#:&-ii N h,*55iifV!-W:ti##hiB, W,' '.5-#M::S%1¥it:zt:ct9ilh ti¥tR es >,;¢5& ; ) 1M:W,,. \t.4$ £# #e!°?S!:::t#tt' §! .:@f!MiJitD~ . *·
. Re'ason: It is "a special promise to answer for the Guarantor Distin·guish.ed from the Debtor
debt, default or miscarriage of: another" (DE Whil(;l ·the guarantor is subsidiarily-liable, the' debtor·
LEON, supr<fl at-298). · • is principally liable (Id. at 1024). ·
.... :
8_: ·. Qratuitous (CIVIL CODE, Arf.._2048) . · Guaranty y. Sure,tyship
. .
Exceptiom If· there is _a c.ontrary stipulation ·
(C/VJL COD_E, A~: 2048):

C~nstruction of a ·Guaranty Contract '' .

General :Rule~ . Strfctly interp,reted. agair:ist th.e ... Liability depends on an Surety assLJmes liability ·
creditor ant;J. in favor of .the· guara_ntor o'r .surel_Y. It i~ independe.nt, agreement as r~gular party tci tt,e
. not to be exten·ded beyor:,d its term_s or specified limit to pay the obligplion ·,f un'dertaklng. · '
. (Magdalena Es_ta'tes Inc: -v. Rodriguez, .G.. R. No, _L~ 'primary debtor· fails to .
. 1841~1; ,December _17, 19,66):-· . , . do so.
. . ·...

Reason:" It is ~ special obligation, (DE LEON, supra .

?.l _322).. >, . .
.
,. '• '•, Guarantor'·' is Surety .''· is prima.rilY_
· Strictissimi Juris-Rule· . .. secon_darily liab,le; liable. . : ~
Pertaios to, 'an accom~o"dation- surety because. tlile G9lla.teral undertaking.' He. is ··an· . orig[n?I.
latter acts without'. motive of pecuniary · gain and promis9r.
- hence; should.be protected.aqairist unjust p~cuniai;y
., _i_mpoverishment by imposing on Ihe principal. duties
. akin 'to those .ofa. fidupiary. (Erma- lndiJ_stries:)9t._v, . ,.
Security Bank Corp., G.R. No, ·1 f}.127.4, Decemf?e(6,
~017). _.·: .' ' ·.. ·.· . ·,:, .: · -~, .. ·· ,tf'~j
E~ceptioo;, In case o(.c~mp~nsat~sure i~st i~ ~,
rules of interpretatlon appertair:ij,r\g to c9ntfact ·_qf '.! i11
insurance applies. (Erm9 lnqus'trtis, Inc: 11 Sec,urity \
_B~nk ~01p.:· G.R. No., 19". ~~:f:~ecen::lfic;~;-~~1~ _
· "' . Reasons; , · .: f
1 '. Compensated corporate sureties ire busiries.s. ,,,,.,·":,,,,:, ,i,t.,_'. •~·~~., -.:.,:·:. -~---. ,·, - ·,.... ,,·.,• •,_., .•
· associatlons- oJgahized_. to-~ assurrre <:;lassifia·d . ~..:1 .,,·-.~ •• ••••
rlsks=ln -1arg_e: numbers," for profit and ··on an'-_--
1 Guarantor),~an avail of Surety cann~1. ayaJ1 ot.
'.• impersonal basis>' ·< ' : ~ : ' - . ·' •., .;]vi the benefit of excussion t)lfbenefit 'of excussiori
2 .. They a're:·~e'cured frorrf all possible .1J[; by ·.- and division· in .case. 'and division.:._.' . , .'
"adequate .·. counterborids . ,<Q! ,.- ., ind~mnJty . . creditor> . '. proceeds ' . ' _.- J ,'
._ . --·.'ag_reeme_nts.(DEJ-EON;:silp(~(_at_3$·1). . ... - .aqainst him.

' 'the rule~ i~' th~t th~<~eb.ts .', in·~~/r~d' :by -di~ec,tors,
-offlcers, and employees acting ascorporate aqents
. c:1re' riot-. th~ir,d_irect·JiabiliJy _but qf the c;brporatlon ·tbey -
· represent,' ex.cept ·If _they· .contractu·ally agree ·o(
. - a~surr,ie. to'_ be ·perso'naliy. liable for.the' corporation's
debts .. Th~ · p_etitio.ner President; in·. lhe case of
Crisolog.o v.:Peop/.e, signed. the· ''Guar~nte·e Clause'.' ·
Of' the=:· ~rU$f receipls·_. 'agre~ments in hi13 personal ... · :. ~ ~· ' .-i #_,_
. capaqity. andei/en·.waived the benefit· qf ·ex.cussidri ' ' ' Pften.-disc'~~rge,c/by·ih'~' ,_Noldi~~ha;M{b.Y q,er~ .
against -the· Cqrp.or~ition: As .sucti,. he,' is-persohaHy. - _mere- indulgeric~· of 'the' indulger\c.e ... of .. tbe
arid solidar.lly. liable with. the_._.c:;9.rporatiori (Cr1sologo · creditor- or_· · want · .of cre'ditor. or by--warir of
v.- People, G.R. No: 199~l}1;·. December 3;: 2012): -notice of
.. .
~ • ' I ' • • ! • t • '
... . default·
,:-: .. notice of default
. ..
· ·.

Surety:'Dii;tinguisheci'from a Sqlidary· Debto·r. ·. (DE LEON, supra a·( 296-298). . .,

A si.Jre.ty is 'almost the-s_ame as a solidary debtor,
except that the iatter 'is hims~lf principal debtor (5 a
PARAS, -supra at 1024).' -
 . CREDl·T ·TRANS·ACTIO·N:S
SAN BEDA I.AW CENTRALIZED BAR OPERATIONS - MEMORY AID-2019 . .
•· ::t\Mite3iiidt¢4*7ki 7@2tt4'£, i,±'W:-i¢h+§,-·ffli# oo:A '?-u;;:a5f5lii§·,·& 'fiPW<wtlfi't~1·2'.@5S:¥¥ih::&i? ._eY&P:iif®t~f.2{4, e:J

·Guaranty v. Warran.ty · · A guaranty . shall be construed as continuing

_ when by the terms-thereof it is 'evident that the
object is' to ·gb,e a standing credit to the principal
debtor to be· used from time _to time (either
'. indefinitely or until a certain period, especially if
tti~e right to. recall the gu;:iranty is expressly ·
- Eact) ·is :~n· u'nde~a'.king bi one party-to. another to reserved.· (Dino·. v. CA/ G.R. · No. 89775,
indernn°ify ormake good._tl:le.as·su'red aqains! some November 26; 1992):
' possJbl~·.<:lef~iJ.lt i;,i- defect.Jn the· contemplation of
the· parties.' · ·

.... ,.

· ...·~.: ·,

.G~~rarit~tiUtµrE{D~bt~ (CIVIL ciOoE; Art. 2053)

1-, Co,ntin-~rig ·qu.ii"rapiy ~f:,~urety~frip. ·:· .. . ..
' · N6t- .limited ' to .. ·a, · single ·transaction· but
. . / .. ; ..... : . :
.1 · _cqn~erJ,plates a · future-. ~ourse. of -dealinqs,
· · coverinq 'a series of-transactionsqenerahy for an ·
:- .
jnd_effnite time or until revoked (DE LEON, supre
at.314J,.· ·
,.. .:.

6q4 .I 2.019-SAN. BEDA LAW CENT.RALIZED BAR 9PERA TI.ONS.

 ®':42'lwte a tiWi4¥&#h£1U ma~.?' . . ; . • IM2#lid!aJI rtMbM ff I 6 +F . fY?-4!4*5'12 #114.¢ l" t415M~4e\i #pi-$ ~

CR.
. ~ EDITiTRANSACTI-Q.
. . bJS· , . . . . :l!ii:_
' ·
. SAN BEDA LAW CENTRALIZED BA_R QPERATIONS -MEMORY A/~·2019 .
f', ¥5\Sit'45Xii!N :Siit4 fr &&;$$ 2:Z4U:Zii't'-i$ 6@,4/iii •.4+ 4 t&f4:M54·Jf21S!IS ·9#1\$ yf*W;&a, rg.;it,s & @i &¢- i4ii%t5MM' 2c Nllfli:I .
. .
Extent of Guarantor's Liability: .. redounded to the benefit of the family)' (CIVIL CODE,
1. Where the· guaranty ·is defirifte: [t is limited in Art. 2.049). .,
whol.e · or in part ·to the principal debt: to the . . ,. I

·exclusion of accessories. (Id. at 333),'or Liability of Heirs ifthe Guarantor Dies ·· . . ·

2. \fVhere guaranty is indefinite or simp'le: J.1 .shall If 'a guarantor dies. hfs· heirs are still liable to ·the.
comprise not :only ~he'-:rfrindpal bhllgati_on, but_ . extent of the -value of the. inheritance because the
also all 'its ace::essories·. including the judicial ~bligation ··is ~-not purely personal and is therefore
costs, provided with respect to the latter.'trat·the transmfssi_ble (5Pl:'_RAS, sup.ra ~t 1040) ..
guarantor shal_l only be liable. for those costs ~. .. ' .
incurred.-~fter. he tias been J.udicially required ro Acceptance of Guaranty·and Notice·Jhe_reof by.
pay· (CIV.IL CO,DE,./J.rt:'- 2055 ·par.. 2/. · the Creditor ·
.. 1:- 1Whe~ Ne.cessa!)' ' · 1 · •· .. , ·· ··.;_ · . ·

Effect of Penalty Cl a Use · . . . ( . IJl!hen _there.is m_~rely'. an o,~er of_~ gua:~nty, or

The penalty m.ay be .dem_anded in, the proper case . merely: a ~ord1t1onal guaranty. requiring an.
even if its'varueis..>more' than the 'aniount cit 'the· · - as;_ti91) by . the· ·credifor befo~.e t~e · oblig_ation
p~incipal d~o((G~neral lnsur~rice &·Sur~iy-corp. y. -. . · .. ·bec·omes . fixed· (Phflippjne National' ~ank v. · ..
· - Republic, G.R. No., L-1387'3; January 3, 19,§3),.. • .. · Garcia; G,R'No. 2,3175,·Marctf)8; 1925).. -
. . :~.. . . .. l . -· ' • .... :/ • ~ \ • •• I •

Oualiflcatlons of a· Guarantor: .(PSC). Reason: Being secondaril~ li~ble, 'th.e guarantor ..

....

· . ·· t · •, '. ". • • -

Has ~i.Jffici~nt property to· answer for the

'• ~' ( ; '· I-' • I' '
. is entitled to kriow the:nature and 'exterit··of his.
· obliqatiori which he g':]9~ante_es; · ·· .' '· , · 1iability (D~ LEON;- supra at 335).:·'· ·
2~ _Eoss'~ss~s integ~ity; and. .: , .
·3. f·~pacity' to .bind .himself (CIVIL .({ODE, "Art'$ ~ .· ·: NQt~: · t\Cceptance . ne(!!d . not: necess~rily. be· .
·2056_ t¢r205!).· ·· · . ·· -: · ..· . _.-, 'j · · express· or in writing, but may· be··indicated· by
... acts aio· ~tirig·to_'·,acc~ptanc~ ~:>i--.i~plied· ?f- ['d:
- c;·~n~r-~1 ·. ~~le};he_ ·qu~[i~tati~~s ;,e~d \tr( be . . .335). . ·
:.. ·.-: . .. . : :,
· .. ·.
. :
~ . ,
. .~ : ~
present 'at t~e~-~ime of the perfection of the contract:
(£?? Ll;ON,.'.su~ra_ f!l' 3:}_9): _ ..~ · · . 2. When Wn ecessary· . . . . • ..
· · -· Where th~ t.rinsactiRn·)s n_o.t rn~'reJy an ·a,~er but
. Excjp·tio·~·: i·h~~ :;~-e/
gi:ia~a~tor ·s~seledted~by th~ , . · :- .:·amo{ntsf'>. a ~ir'ect,or .un~c:,nclitional pr~rnise of_
.· :prjne,ip~i'-_debto'i-"because the latter"\:1ns;e,i for the4' .. 9~;LJl_Y !fdJ ~!l~~6).. · . · .• .. '. · ;_;,: : ;.·. : _ . ·. :
~OIV~ncy 'of. th~ )?rmer.. :.(n)h\s C~§>e~tfl.s)/~Uaran.wr.: ·. ,;Exceptron: I\J.~e,,of .. aq:ep_tance rs'. made a · ·
most possess-the qualificatioq_s,Rre$c;~ib'ed no.t_ oqlY: : ·conditiOJLQf..th.e guaranty'('Texas V; Alonso, 'G:R:·
atthe moment the quaranty.fs g,i1en·~c:!1So·until t'}e No: 47495;~ August.1'4;
.
19,41);
. . · ·· ·
exlinquishment of the debt (!d~ at-:pn). : ·
•. · . . .. ~ -.. :. . .• ·" ,= .' · · ·· Selectipn of a. G.u.aranto.r· ;... ; :.. · .: . -· . · ~ .· .· . .
Reason:' A·guarahty_is :f6r the b'einefii ..o'f(Jhe c_red~~. ,, . 1: .Required<'an·d.· stipulated 1by. creditor · .-·
n~t·~h-~ ·?-er.to~; _h_en_c~ t~~-.Jorr11 ..~r ITlf\~·;.vaive t~.e · substitution of guarantor may not be demanded
qualifications .(5 TOLENT/NO;supra a(-5:toJJ ,· . . .. ((;JV/{ COD_E, Art. ·-20Q7.). · > . .-- .: .: • • · •
. . . .-- .. · ·, ,_. · ' ' .. 2.;' Select.ecf:' !Ji :the.'.,. principal .debtop: ,.:. -the ·
Effect of :_ Subsequ,~nt ··.io~~· (Required" .of ... .-: · .: · principal ';'de~tor ·: 'answers .. for.' the:~ integrity;' . .
J:)Ualificattons' ::~ . ··: . ·_. :,:·· . . . :..: . . · ·. . _ :._ ·. capacity,,.:an.cFSC>IVi3ffdY,'6fthe· guarantorsiietted~ .
. The supsecfuent los~ ot'the)ntegr_ity' (conyicti.dJI in . · . · : . .(EJJ=,.LEf.ON, supra at 341).' ; : ·1· • • •. · .
first instance of ~ crime involyirig dishon~sty)." or. .. 3 .. Personally ·designated.J:>y:·the·.:·creditor, :-
Pr<?perty .. (bec9rnes·: :· ins.o.lv~nt), ... -~lJperiE;inin'g. 9r, · .':respon.sibility:.for-, lh'e._seledion ·shal~_ fai1.·up·on· the. ·. ·.
. incapaFity of_ the. guaranto·r· would iiot-'opetate_.·. to ,. . creditor and nnt·on.the de'r:itor.(ld.-~f34·1J. >.'
exonerqte the·gt,Jc!far.itox oft.hE;l eventu.al liability he. . ·.> ·.' ," .-:. < .. :· . . ': - ... . . . ; . . .
has· contractec;I,. and . the contract'. 9f guaranty. Rights of A:G uaranf9-~ (ED.-CIGS) ... · ::· · . . . •
0

c·ootinues •. · HoWE;lver.~. the- creditor· may' ··demand . 1. · · Ben._efjt of gxcl_Jssion' (CIVIi:. c.ODE,·Ait: 2058);-: ·:.
another guarantor i,yith the proper quaiifications: ·sut. . . 2: _-BenEJfit of Qivision' (C1VIL' CODE, Art 2065); .
1.
. h~·~ayW.aiy~'.it ifhe_c~~oses.~qd hqlq .. t,hE{!;luar~m.tor. 3: Right to;foritribufip~ of a. gt:Jarantor-,yjho·pays if.
. to· h_rs -bargarn (E;s(ate· .of K.H .. He(!.lady. v: . .J,..uzon ·:' ··. there. is'. s'olidary.'li~bility- ·rc1VJL ·:.CODE;. Art:
$i.Jrety,..Co:,: Inc:, . G.R:· No. Lc8437, November 28, 2078);' · .. · . ·. ; . :· _. ,... : ... - .:·
1956). ·.· · · ·. " 4. ·.. Right· ·of !ndefnl"!IIY ~ or reimbu(sement: (CIVIL
0:. ·CODE,.:Arl·. 20~6); · ;\ , ,- . . . . .. .
c·apacity··oi a Marrie.d<Woman ·· : · · ·.: ' 5, · Right Qf. Gu.aranfor. fo· proceed against debtor·. ·
A' married··iwoman may guarantee -an .9pligation. · before.'payrnent (CWIL GODE,-Art. 2071fani:J .--
without the husband'.s consent, bu~_shall Qot thereby . 6. Right to ~i:J~rogation.-(G/Y/L CODE,··A_rt: 2061).
bind. the conjugal partnership, . except. in cases . ' .
pr?vided . by law- (i.e. · when._ the guaranty ·has·

..
· ?rn!=l SAN RFnA r AW r.FNTRAI r7Fn RAR nPFRATrnNs 1 1,1,s
 . .
CR;EDIT TRA·NSA.CTIO·NS
. . J . . ..
SAN BEDA LAW CENTRALIZEQBAR OPERATIONS- MEMORY AID .2019.'

1. B~nefit of-Excus;ion · . Note: The creditor is noJ required to go a~er

Right in· ·which the guarantor cannot be- a debtor·who is· hidin~j'or canndt be Sued in
comp_elled to. pay the creditor_ unless the" latt_er our·· courts·.- and ·10. ·incur the-,dela'ys and ..
has e)(hausted an- the prpperties o(the principal ... ' expenses incident thereto (QE LEON; supra ·
. debtor, and h~s r.esorted to aU.: ..of the legal. · at 346). "'· · ·
reme·dies against such·debtor (CIVIL CODE, Art.
2058). , c.- In case. of Insolvency of the deb.tor {CIVIL ·
CODE,_-Art. 2059 par. 3)); . .
Reason: Character of the·contract as accessory · "'

and subsidiary (DE LEON; supra ~t 342) .. Note: It is not r)e¢essary that the debtor. be
judicic;1lly declar.ed· insolveot or -~ankr1,1pt, but
·How_E.xercised: . · the insolvency or inability to pay must be
a. D.emand for· -payment upon the guarantor· actual (DE L~ON, supra at 346). .
only after judgment upon the debt; and -..,, . -

b. Point out the available property (not i~ d. The guarc;1ntor=has expressly. Renounced it
litigation cir encumberedrof the debtor. within . _ (ci.VIL CODE, Art. 2059 par. 1); · :·-'>.
the Philipplnes, -sufficient- to .cover the · ·--· · .»
· · · Reason; _The· benefit of excussion -is a
amount of the debt (CIVIL CODE, Art. ·. · ·· d · t It
2060) ·. . personal nght recoqmze m a guacafl_ or. : s _
. . · , . - · waiver is valid (DEtEON, s_u(Jra at 345). · ·

. :he credit~r ~ay. -~rior to ..-e~haustion. qe-~re - a·

··.·JUd~m·ent_ aqainst ~he guar_a~t~-rrw:_~$~bg_~
U NJ: lih~ - be"ne~it · df ~~cussi~n
,.\JJ.pd~r·t~e'.t~~-~t.re.c~ipt d~te1(3Q 8eQte0ber ·
~a; ti~. 1~:v'el

entitle~:. ~o":"ever, to .. a. a;~r9:.e~~of11'1h~ ~~ . . '"'~ 981¢'~et1tioher .. Jose ~ - Tupaz- _-w;:i1v.ed

execut1?n of Judgmen~ a~~mft. nim_;,y]J-11 ~!!§1:-tt:ie - .1} _-......._. ex~ssi~ll.wjlen he aqreed that .his "liability ·
properties .of - the pnn~ipjl&ebt~~hr,11,. h~"f~; . ~. w - . . \n _[the). gi~lanty- shall be D(R.ECT. AND
been exhausted, to_ sat1se the l<jllte~ S ~bhg~t1~n .ft} .!&. . IMME~_J,\.TE; \,ithout any· needwhatsoever

2005)
- · ; . : _ ·
iZr
C!upaz_ v. _c;;A, G.R. No, 455!7-Novem[?er18, . .
.
. ~ I~~.
, • ~
· • , 7 F
· . . . Jn ... _[tifeJ'~fl [of respondent bal')_k] to take.

·
I , t t. ~ ~·h t ..
.. .c.-'"~...,, . ~ny s e~§. ?r ex aus ~ny _ega__ rem_e 1es
I I ... d ... ,,
. -· . ·
. ,
·.
·-11 ~
, . - ·.
Effect of. Failure of the Cr,e ,ttQr to. Exhaust,,m..--177,,, ~
and-·Resort to AII.Leg'.al.Remedi;_e5.inle.shall"·
• :~~ . . '':.:.:.··~-..
if;h~. clear 1mgo-.,tt.. of t~1~.)~\1p1,1latJ9!:1_-1s.
·--t·t·
~ --/. -· · · .-iJf.,.,,.. ·-:.,.
~ ~J
• ern~oner ose upaz wa1Ye . e ene I o
<d · h·. -·
r. ·
d th b. ·· f"t f
th.~-~
·t .-· (T, .- ·· -·
·
·b •··1-.,: ,;..-....:r:·. '.. • exc ss10n.un_er._1s·guacanee upa.l v.
s1;1 ff ~r_t h e_oss
I 1· y-,e~J5.lent~.,,,.t, ~Hrt'
1 .
.. ut:ony:to- vau.l?i;ri ~~1· f(!;dlrt 1 4·tie'als .. G.R ·.· No. -145578
of_ the ~aid· property fo~rht'l(lslv~ c:b:.ot th~ -~?' . '.<"\.AY·-·- l'·: . J •••• ': • • • • ' ,..

~ebtor.(CIVIL_ CODE1._Art:_ ~~1) .. , ·· ... ~)· 1rfil . ' . ~v~~1b~r,1 ,3o~~)-.... · .. ··_:.··. ·:: -~· .. __
.:.. . . : . . · ·, . :... - . . . . e .If be h;:is. bound. himself ~ohdanly with tlie
. !~)~L ~?i~:~~t2~:;;~/r;c!hd1~:it~ ~7!~:fff!~Arl,20>9 <2JJ; •••....•
2)._ ·, ·,
. . - _. _ :· ..· .· '·_bef~:>r~
·This. - -cannot..:t~ke-.place .,._ !~Q~\~as9n:
... · _ ., Judgmen~EON, B.~.~Uf~.)ie . .ren9un.s.~~s m __the·
· . .l · -MA\~ ~e6fractsupra-a.t346).
its~lft~e-b~_11efi.t of·exhau?tion (DE
: _ . ·. ·_..
_been_ ot;,t~ined aga_inst the debtor (Bay/pn.v. CA, · •. · .,,_ - , · ·-, ·-"'--~ - ·· .• , - ·· ·
- G.R.-No.· 109~4-1°;-August.1f 199~). < · · .· f. · Wh~·n the:debt is·a Natural "oblig'ation "cir ah·
·-.. .:. . ~ . ,. ·. . ' ' . lJf)enforc,e-able cit;>ligajion;....: ·..... · . ·: . ::
When· ·G.uararjt<;>r_/i~: -NOT; E,ntitl~p: ttf · tl}e · · · ·
Bene.fit of Ex~w~s_iqn:- (PA.IR.~~N~E31P.S).:·_: .· . Reason:·.- Be'callse in these~ 6ases,-, the
a. ' lf'it inay be P.r:esurrfed .. that .an executfon on . . _. creditor has· rio a~d,on" against the priricip"ai
the prop~rtyqfth.e'principal deb:to·r.,;ould nof d~btor (5 TOL.ANTI.NC?,.supr.a~at 514f_.
result in the. s~\_is.factiQ~ '.OL_ the o_bligation: •, -·- .

- (qVIL:CODE; Art: go59:par,"5));. · . ·. · _ . · 9·.. lfhe. is a jl.iciicial:_§.~·n_ds~c!n. C>r-S!Jb:-S·Ll~ety;· · :. ·. ·: .· ·

. . .. r· . ·.. ,- .... - . · .. · .'- .• -:·~I ·• ·:~'.-· _,: ~.--.·- •• _·. ···;., --:- ...

r-i~te: lfis n?J.neces.sary;··b·~~~~~r, th.at !he_. h: , If he fail? to !nterJ:Jose it as' ·defense before a -
de.Qtor "be jud}c1~11y declared ._insolvent or· · judgrperir. i's . rendered_.'. ·ag$inst, ·.him·. ·
b~n_l<r.upt ·(DE'L_EONt s"up_ra ii~~6).. : (Saavedra ·v. · Price; ·:G.R:- ·No.-- 46-702,
6ctober"<5, ._19~~);· - - · : ~. .-, ·: - · .-
. b: Wher:i th~ d~bt~r has Absconded, or·cacmot, . ... . . ..,, .
· be:~Lied,within ttie·Phittppines.unless he.has . i. · If the guarantqr_ does-_not:.set up the ~enefif_
left . a manager .. o.( rep_resentative · (CIVIC agai~st .. it:ie - _ ¢(ed.itor upon: - the la.tte.r's -
CODE, Art. 2059 par. 4)); - . den,and . f_or ::_Raym~_rit fn;jm, --hiin .. ·(CIVIL·.
CODE, Art. 206Q); and ·
,, ..
- ...

666 2019 SAN SEDA

. . LAW
. . CENTRALIZED BAR OPERATIONS
.
 CFfEDlT TRAN . SACTIO.NS
. SAN BEDA LAWCENTRALl7ED BAR OPERATIONS - MEMORY AID 201.9
tMC.-4?ffeW'44Jd1i\Sti_ S:6 i 23£ t' 1? 5ffi2! ·rciiiWt':\ . ME' !5' :7 4i4:4p54.;s UC b:.-1 Sryi!IP-i'& at ,i 4?¥,ft:ii;t ,Ni!§fil\ntrr,

Art. 2_060 imposes · a: condition for· the. 3. .Right to· Contribution of Guarar:itbr W,ho Pays
invocation of the·defense of excussion. Art. ifTher~ is a Solidary liability . . · ·
206-0 of the· Civil Code clearly requires that .
-inorder-for the quarantor to-make use of the General Rule: Guaranfor nYay demand bf each
benefit of excussion, he must set it up .of t~e.,others ·the shar-e· which proportionally
aqainst ··!.he·. creditof . upon the· latter's. . ?wes f(or:n ·him;· p'rovi.ded: any of the 'following ·
. demand for. payment ··and point out to the conditions' ~re 'm'e!': . ' . . . . . .
creditor." available· property of the debtor· : a:· Payf!1ent' hc:1s been made:· by virtue of a
within the Phillppines sufficient to cover the · . ju,dici~ldemand; or . . :. . ·-·
amount of. thedebt. It ·must he stressed that · b. p·~incipal. de,btor ts· insolvent (CIVIL COD&;
despite/having been served ·a d~mand letter . Art. 20-73).
. . . .. : .
r·

at his office, ·petitioner.still f~iled'.to pojnfci~'t Accrual or Basis of..Right: Acq!,.Jired ipso jur~ ·
to "tne respondent properties of -Macroqen by .-virtue oLs'aid paymerit · without- any prior
·· i · · ·-. ~ealty su~icjent'to:cover.itfdebt as required · cession of-rights to·~u·ch ..guarantor' (OE LEON,
· , '. .Lll'}der. -Article .2060' of the C,ivil Code. ·Such supra.. at.374). · ·... _ ·, : · ·
.. . ' -·. failure on petitioner's .part forecloses his
l .
. · : right to set up. the defense .of 'excussion .. -
·'(Bitanga v: - . Pyramic/ Consiructior: Exceptions: ''· .
. Erigineeting ··corp.,, ·G.R ... No. 173526, . :a. ·The insolvent guarantor cannot be made-to
_ August 28, 2_008). -. . -. · . .· '· ·.. pay.Tn' StJCh case. his'share sh:..ill borne' be
t:,ithe.other~'jr;iclilding·thE: paying quarantor . ' .
. Note: Dem~·nd must be ~ctua1.·:Joi~i~g the in tlie_ same jolntproportion; 'or · . · .
guarantor in. the suit aqainst the. principa ~ . b. W.hen .co-quarantors t:i'cive.~defens~s against
· debtor is not the; demandintended by lqw the_ one who .paid the same which .have
. (q·E--L~.·o.N;.s.up.ra _at ~4_7)._· '. ·.'-... ·. ;/ . . ·'·ger.t~i9ed. fotl\e. P.rir:t~.ip~l-d ~btot-ag~inst the· 0

., creditor and which arenot purely personal to,

..J .. W~ere the· -pledqe oc mortgagejfhas beeri ~he··~ebtor. (CIVl(CODE, ·Art.:2b7il); . · · ·.
·.·: giv_ e.·n_.. · ·_by him.. -~·s §.. pecial sec. ur'_i't,C/d~ a.t 345... 1.
__ tr ~ ':I-
- 1 ' ' ·. · .. ~. · · .... · · -:·
~f·[\~L!arant.~r •. in_ ~as_e '?f. the jnsoly~ncy
·. -: : Note~:~~
· · :·· .
. .-. .T . ·· ·. · · · ·: .C:· · · · of the gu.arantorfor- wh6m he boundrhim·self -is .
N. _ote: . he ·guarantor of a guarantor..lfshall · · , 11 · • '
' e~joy the ;_b_enefit of{excussicm;· }oth·. 'witii' . : · · · '--r~sponsio}e · to the 9,0:guqra·ntors . _in·· the .. s.;:ime _, ·
.. .. . respecrtp the·.guaraoter ar:idqi!)jeKinciRal.. . · ~erofs·as_th~guara tor (CI.VIL_(;ODE; A,:t: 2075) ..
: ... · : de?_for.(_C_IV·l·L _COD~: Aft. 20.~4)._· ·: ·:. ~-
. .· ,
.1· . ·. . :.·
';r, ~ ··. . · · . .- ·· ·' ·· :·. · ., ·
.-. Right to Co trib~tion and Benefit o.f Di~ision
.
2:· -Benefit'of Division· ~ · . : · · . · .. · Distinguish~d · · .. · · ·.
· · $hould th.ere bi:l. sevec.al ·guara~tors-~~n!y cine·.· ---1n""'the b~nefit Qf divi~ion· ·(CIVIL° CODE; /Art.
debtor and for· the same· debt-the obligation-'tto _ 2@65J~ther~ · has: •.bee.n. ho . paymerit by the
answer for t.!1Efsa!11e:is·divided among air (tiVIL · . : ·~uara_ntpr. Yet, iri the· rigl)t't() cont~io~tion (CIVIL
.... CODE,Art. 2065),· · ·:: · _ ·, CODE,.Art>,2pl3), the pay_rjier:i(has'°been.incide
· · ··bec_al:JS~ ·of-judicial· proceedings or. ir:isolvency of
· the princ\p~I- de.btor:(Caiho·· v. ·Valle'~;· GR.· No .
. ·..'.· .
·· .... 19493,.Augµsf-,27/192"3)_!_' : . · ·~ · .
,•·
. . . ' . ·~ ··-· .. '

·Exception's:· ,
Proce~:h.lre When Credito; Sues:'' . · .
. a·. w'hen sbl.idari~y is expressly"stipulated; arid,'
. b. . If af!Y. of the _:circumsfances eriuinerated. in · a .. · The· credi~or must sue. tre princ;ip~L.debfor .
· . q:1lo'n~·. :.The guararitor ~annal be . sued.,-With ·
· . ,Arf..,2059.o(the Civif Code shou.ld,take pl.ace .. his principal·~·xce'pt in the case' mentioned in '
· (DE LEON,· -supra at 352-353). · '. . . . · ·
.
. :'·.
.. ; .~ . ; . . '. ... . . . .

Not~: "The guaranfor. is not required to .'point ~ut

. . . . Art .. 2059 of the.Civil CoHe: ·, · ·· '·
. ·b,: Notice tc?"gtrara~tohjt,
...._ ·.
a'ctfon; ... ti,~·.

· the prop·~rty of ·his- ·co-guarantors· sfnce their

obligation witi,. respect. to: each. other is· not .. . "": -- Th~ guarant9r mu~~t "be N9TIFIED .. (9/VIL
's4bsidiary' but .direct. If d.oes ryot depe.nd ~s to.
· · . . CODE; J!.rl.
2062):.· ltth·e gu9rantbr appe~rs:
· · he· is still' ,given the be.Aefit .of . exhaustion
their solvency,. although if o.ne· of. them· should
. turn out to "be''irisolvent,' his share has to be'.. . . even J_f j9d.gment should be rehdei'ecl against
1 • born~ by the othe·rs (Id .. at 355). . ~im' and
the principal debtor: . .Voluntary
. . . . .. . .. . . ~ ,' appearance -, : 'does . not -_.·constitute a
·-· , r~riunciati,~t:1'::o.f his ·riQht t.o :excussion (DE .
~EON, supra at 3q0). · · , ..

. .. \
 . ..
·CR_E..DlT TRAN.-SACJJQN.S
SAN BEDA LAW CENTRALIZED·f!AR OPERATIONS - MEM_GRYAID 20 19

The guarantor cannot set.up the. defenses. lf Effect of Payment by Guarantor:

he 'doesnot appear. It. may· no lonqer be a. Withoutnotice to debtor .. .
·possible for him to question' the validity of.
. the judgment (Id. at350): · ·1 · -· · . · The. debtor -rnay:' interpose ." against the
·. · . gu_arantor·. those defenses which he "could
c. A--gu.ar.antor is ·~ntitl~c:i" t_a.· be heard before · · . . have. set up against the creditorat the time
execution can be· issued. aqainst him. where . the ·payment .was made ( e.q. uie debtor can.
.he is 'not a. party in the ·6-ase involving his. - set up- aga}nsi the gu_ara,ntor the defense of
· principal 'since thjs constitutes, procedural 'previous. e~tinguish_([lent"of. the opli<jcJtion by
·ql!.~·process·(ld. at 350). '.,. . . -: · payment) (8/VIL CQDE,·Art:.2068).

·1

. ~i~h{. ~i '· ·G~~;~Jt~~-. :~~- ·.P·~~~~-e~ : A~ains.~~'

-b.e,bfor, Befi::>re:Payrp_en\ ' · . .
General . Rule: . Guarantor . has no -right to
'proceed aqainst the principal debtor _iintil he has "
adua_ll.Y paid the_ ?·~bt (I~. at 396).

/' ' .

·-·
. '·, 668 .
·.. , I 2019
'
S.AN
. .
SEDA-LAW
·.: .. .., .. ~Ef>ITRALIZEDBA.R
\' . ,• . . OPERATjQNS
'· '
 C·RE·o1,T TRAN.SACTIONS.
, . · .. SAN BEDA LAW CENTRALIZED BAR OPERA:IONS - MEMORY",..,~ 2019 .
£,:EtMS5-#Fft'¥4 ,Y,4?!: stiw. ,#(iWSAt:#45>&$&diM itkfS:##~ :AS41UJ·%@ &Rif!*@',¥5t#S#'iiif..t:;Bi
'-" t:•j@,:441' MS~~Er"
. ' ·' .
·Exceptions: (SIB-D,-TRI)·· . 6. Right to Subrogation ·
' a. vyhen he is §tiedJor payment; · .·. '. Subrogation,transfers io the person subrogated· ·
b.. [nsolvency oftheprjnclpal debtor; . the credit '-';,'ith all the right::, thereto appertaining ·_ ·
c. ; Debtor has f!ound· .. himself to relieve. him either against the debtor· or · a·gainst third ··· ·
from the quaranty within a-speclfled period, persotis, be they. guarantors' or. possessors •of .
and this period has expired; . - mortgages, subject to stipµlation:in ccinveintional
d. Qetit becomes. dernandable ,by. -reason of subrogat_ion (CIVIL CODE, Art. 1303) ..
.. _ ~xpira!ion .orperlod.of ~pym~nt; .· : .
e,,. Lapse of Ien (10):yea..r~; 'whenthere's no ··Npte: This right of subrogation is necessary to
fixed period tor.lts maturity, unless it eannot enable. the guarantor to er,force the;ind~.mnity
r. be extinguishec( except within a period ·. given in Art. ·2066 of the Civil Code:(fJE LEON,
lonqerthan ten (1 Q). years... . supra at 360), . . . .
f ... ,BeasoriaQle 'grdunds' to . tear-: that the p • (" •

.
.
priricipal
. . . ,-will abscond;. . . arid ~ . -a.. ,· .. . ~ ./ .. , • rt arises by ope.ration of law upon paym,ent. by
. · g~ The, -debtor; ·is. in" !mm1nenf danqer; of- the guarantor'.~ . It-· is not l')ec·ess"ary t~at 'the .
. oe,coming Insolvent. teivu', '.Art. cooe, ·- I creditor ce'des to the gu;:irahtol 'the- fornier's
2071) ... ;~:. · ··: ·,.: · · ·· .s, .. .-.. r) righfa ag_ainst the debtor (fr;J. at 360)'. ' ·
. \• . . . i ! ~-· . . ,,. . - .. , ' .

. .: .·,n all .. thes~ cases: the ~ction.of the gu,af;n!or is It is no.t a contrac;tual ·right. . The · right 'of _a ·.
. : 'to: , . _ ,.. · · · guarantor- who has ··paid. a debt pu~suant to
., .
_ .a.:.
Obtain release from-the gu~rc;1n_ty; or ; ', ;. . subrogation does not s!and 'l:lpo1:1 a co'ntract but
. b. Demand a security that shalkprotect him upon t~E:l principles of n~tural just_i~e (Id.). ,,
.. · ·' .. -. frorrr anyproceedlrrqs - by the' .creditor. afld
. ;, . from the darig'~r ',of insolvency,of the de_b'tor The g~arantor is. ~ubrogated _by virtue of . the
· , ;. ; (c1~,~~C.?P.E,A~'._.-zwn . . ·. :.. ··/.' _.-........,payment to the rights of.the, creditor, noUhose of
tlie dE:l~~or, (Id.): :.. · · - · .· · ' . : ·. ·.. · .,· .. <
"rtiese remedies .are' alternative; ~e:)ias th_e
riqhtto i::h~cise· the -action to bring (.DE LEO~, I~ the.;rfar~~tor paid a sm.aUer ;-m~uni by -~irh.J.e· ,,.
· supra at 367)'. : > .:~ _. ·. . : ·. .; . · · . . of a c,9_mgfor~ise,:he _cannot. qe~ahd·r11ore:lhan .
· what he actually paid (Id.).· .-· · · .. - .:
''""1":"'

~ot~·:;:ri:~enjfil- of ,.suqrogaUo"~. ca~;ot b_e

· inv9kecldg\\.,.eases whore th.~- guarantor has .r~o
l·
··• · .right to be reimbtJrsetj (Id.' at 361).
. '-
As · long· .as consent:: to, the:·· gt.iaranty was
_......, __ oqtainea, 'the' right of subrogation is ·abs"olute
. · . even if the: debtor refu'ses' the. subrogation (5
~. · · · 'PA'r~AS, supra at 1049): · · .·· ... ·· · · '/ . ·. ·
!'"· -·: • • . . ,. •

· : 'Gua~~nto.r:o.f third person .not pre.~-ent.'~tthe, :

. .. teqµest ot' a11otljer ·. ::· · .. . . . , . . .
The .'guarartor · who
satisfies the: ·.-debt fi:lay' .
deml:ind paymen.t from:· : · · .. . .· . ,: ·.
•' -::: . .. . \. :, . . ·... • :•. ··: .... . ;_: ·· q. . The. perso.n: who · r.e'qu~~ted . him .· to· be a.·
Provides . ·. . for·· '. . the' '.·Provides . , 'tcfr · ... his guarantcir; or-, · .' ·" . ·.: ·: :· · · . ·.,
· en'forcertienfof thi rights.··. protecii8ri'' 'befo~!:)' .; he b: The . deb~or.(~IVIL COQE, Art.· 2072)
. 9,flh~ gy,arint<?t or .~ur_ety. h~·s·. p~id, but .. aftei;·ne. .. .. .
·'
,· '
.... "again~( J.h~ d~bto'r after -:1:ias .become 'liable.·., ..
' Effects of C~mpromise : '. . , .. .
. \ he· h~s·P,aip the:debt.. ,.
•- I •-._' •, • :· • -,, ',• .,, ; • .A compromise between the cre.djlor and the principal
c;l_ebtor benefits the.guaranto"r but does. nbt p~ejudicl:l
hirri. . .. , . . · ·- · : . : · ... · _;"· :·

'.Giv~~ .. <3:. ~ig_~t~· '?-C

a~~io~. Protective·. . ·: ~~rpedy That. which is ente.red i~t~, b~tw~en t.he guarantor :· ·
after payment which 1s a before ·payment. This
and the. creditor benefits but does not prejuqice the
- ·:~_ubsiaritiv~ right. . . . remedy. is preliriiin~ry; prin.cip·a1 .debtor (CIVIL CODE, A_rt .. 2.063). · . .
. (DELi;ON, supnfa(.368[ ·.. ("
:·: .·.
-.·
 CREDIT·TRANSACTIQN·S
.. _ SAN BEOA [AW CENTRALIZED BAR OPERATiONS - ME~O(lY AID 2019
~a t4'·4§5C.;t;;p; ?i Jffi#S • 'RM¥%t¥8«::e $$. }:t•;oo. tY-: #'Z¥#£5 JEriiS W 'i!-8n7&#Ki 55 uzsW#ditRW SiiiikP!:!f'

Reason: A contract binds only 'the parties thereto Note: Mere failure on tbe part ofthe creditor to
<and not third persons, but.if the same can benefit the demand payment afterthe debt has become due
guarantor or debtor as· it· is in' the nature of· a does not of itself constitute any extension of time
_· stipulation in favor of a third person, lhe guarantor or . (Hongkong & Shanghai Bank v. Aldecoa & Co,
debtor may accept unless it' has. been .. revoked ' G.R. No. '£3437~ March 23, '1915). _.
,,•
before acceptance · (CIVIL CGDE, Art .. 13'11 ).
Reason: The guaranto_r would. not be prejudiced
.. .
since his recourse would. be to avail:himself of
Extinguishment of Guaranty .
Guaranty. being accessory and subsidiary, it is also the right granted under, Artiate-2071 of the Civil
terminated when the · principal obligation is Code (5PARAS,.i;upra 9t-1061). . -
extinquished (DE.LEON, .supre at 377):
· The theory behind Article 2079 is· -that an
Causes: (RA2CE2) extension of time given tothe.principal debtor by
1.. · Release in favor of one of ,'the quarantors. the creditor witholitthe' surety's consent would
. without the consent of. the others, benefits all to. deprive the surety of hisriqht.to pay thecreditor,
the extent.o! t~e
share ofthe guarantor to whom a~d to be immediately. .subroqated _lo' the
· _·it has be~n granted (C!ViL. CODE, Art. 2078); creditor's remedies' against Jh~. prfncfpal cf~btor
_ _ upon the orlqinal maturity date.'. The surety is
2. If the creditor. voluntarily ~ccepts immovable or.., =--- said to be entitled toprotect himself. aqalnst the
other prep~.rties in .payment of the de,e!, evehif y 1 . ......,~':nttc9~ncy of tt:ie. pri~cipal .debtor. or the
he_ s:houlq" afterwards . lose. the ~e th,~gh U -J \JmpBrrJ._f'l!lors, _P~~ommg, i_nso_lvent . durinq, the
. eviction or conveyance" .of prop':,lilY\ (PJV{l,. . exte~a;.?· ~eno.. d... Th~;..und~[IXmg ~at1ona~e rs not
. CODE:,-Art.-.2077); :, . /./' y ...,/. . . · . present 1_w.l~ 1~.stant case (9oqh1_ngya'lt· Jr. v: R
. · . . ·... : . /~~/..,-:-:" .s~·- .-...~·$ur~tyar;,fUnsuranGeD~.; /~c.,.G._R. No. L-
Effect · of· .Eviction: ~e~al.'\ .,of. ~mc1p~, 'K -o/7 47369~uq_eWJ;.1987). . · · · .
obligation, n9.! the guaranty (DE.LEON, supra at. -~ l&. : \ '\' ( .. . . . . . .
383). : ·. .: . . . .,,__ -/ : . · . ,·v\: . .
sue~·~ d~~axf!1? ever, ··exti~.~u_i_s~es .• the.
. . · . . .. 'L,1111;1 · .• guar~a ty'. \ :~ \' . · ....
3. · Y,.,:heneve~ by so.me .. ~ct ~·f'{ the - creditor~ t9.e·7~ t'I(! t, .,'~a.
When the ae!a~i~ for: such 11::ngth of time ;:is
~uaran.tors,. ev!,ln_' t_hottg~~n~y. -are Joli?aril~~~= .. ~l,ow~p~eses.i~tion pf the a_cti,on to enforce
hable, · c;:annot· :be . sul:>(9g_at~d t_o, J\~\;~~h~s.">---~ : : ·· :~2YJ)1enr.-:and / -'. · : · . ? , ·, . ·. .
m·b.r:tgages._:arJ.d prefere_n\~~fi~tl~·fo~mt'fur
CODE,. -Art. 2080); - \ v. .
(CJV/Lrb"i.
OA,\.. ·~ ·-vr~ · .
6· . WJ;)en u}.9A[i~a ~nty, th~-g. va... r~ntqr,r?q· uires
~4~ ftib_e cr,a1to..r folnforce ·payment- against the
.. : -~. ·., . '-\ · . , h'tJ . \tr~
_. .;;:;/ -~debtr;~.b.ut:~he: cre1itcir f~i!§. to ..~ct and t~e.
Ra~·~~ale; Th_e crl:ld_1tor must not worse9 f.je .· ,- . .- ·dE:~.tor .~ub1l'q.uently· bec;om~s m.so.lv.e_nt (5
L~~N~~-'./EN1:\C---;J®LEN7{/NO:·~-~:r~_.
· j~9r1~n_: of t~~ _gu9.rant~r. (~\:.E 5~t· ar . . : : : , .
·.. . . .. · . :·- ' . ...f)'()~G/At. y.11~ . ro~· h"J~ .0 'bl"1ga r·ion .m ..
'1. .
: ',. . . . : uasaJ-1519. ~I so R e_1·E:,ase·
. df'.
N~te: "Act"·should_ inc!~ae . .','.inactio·n~C5 P~flAS, \. J.lli1'-F-:<;>l~<Win~·lnst<!~Ce~.= . . . · . . .·.. ·
supra.at 1Q6.6): · .. . ·· · ~rechtor d1d-no_t colll:)ct·from third. perl:>ons;. ··
A .. Fpr the sarne,·~auses ~s. all othe.r ·obligations 2.- ObJ!g9(ioos pay;:ible· io .in~t13llrneJ'.it.s. (DE~~{=ON;'
~ uncfer Art,'1231 (CIVIL f;ODE; A,it-."20.76);' . -, ·. suprti'a{385); · · -:_ ·:" . ' · ··~· .... , · :. · ·i- .
·. :a.': -P~yrri~~t:cir,PE§rform'ance;.
b. Loss o'f the'.ttflng:due;
.. . . . ::~ ·: ·r _: . ,· '.:· . :·: ., :~_·.·. ·: _-:· .... :··,: : · '
General· Rule: Extension· of tim·e as to ·ori'e or·
··o. Cc:mqonation· Q'r Re-,.riiss(on oftl:le.debt; ·. morE;)'. will n'9t1~ff~ct- the ii~bilit/~(the: for ~~retY.
· ·d. ·cohfusid.n or _Merger of the .rights of. the. .· the othe,rs (Id. ~l 384~385). . \ ·· .
. -credito"rand'debtor;:· . ..·.·· .·· •' .;··· .·,. ;'· ..
· e. C:ompensation;. and .. . Exceptfo~::.-lf t~?-~h~le un~;aid :ba.lar1ce has
·f. . Novati6n - · ·... ·: , b'ecome' · :·a()tqm"atically" ' ·due ,: '(uMer°'.': <ah
. · · -·. , · · - · acceJ~_r?tign . clause) ,_.,for . . fa1lu.re . t6. pay
.an-
. Othe/.. c_aus.es: ·Annulment, Rescission, . installment, thl:l. act of Jhe.cre.ditor .of extending
Fulfillrnent of a Res~lutory :Condition,: arid ... Jh~ 'parrtient:wH~o~tJ~e>gu~rantd(s;;i?n~e~t;
(Radi9:_
0

Prescriptio~_.· ·di~gba,rges fh~ "guah1nfor ~oip. ·. of. the

· · .Phil.,. v:Roa, G.R. .Np_.' 12(329/ Septemb(jr 30,:
·5:. Wh·en principal o_blig13tion·is.,l;xtinguished;. ancj .1'93_5), . . . . .
'.
6: gxten?ion _grari_ted. to the debtor by the creditor 3, · Consent- t~ extensionis· NOT waived in advance
withoyt · the consent of trie guarantor (.CIVIL byJhe guarantor (DE ~EON,.supra at';386);
COPE, Art. 2079). - · · 4. Exte'nsion granted by ·creditor on. t5ond (Id. at
387); · .

.,.
670 2019 SAN SEDA .Cf:,W CENTRALIZED B'AR OPl;RATIONS
 WIG A

. .
5. Extension grantee!' to first-tier obllqors, cannot Bondsman·
prejudice second-tier parties (.Id .. at- 387); · A surety offered. in virtue· of a provision of law· or a
6.. Matertal alterations, which essentially. vary the judicial order. He must have ·the qualifications
terms of ·the contract without consent .of the required of a guaral'}tbr (CIVIL CODE, Art. 2056) an·d
· surety, will release the surety from. liability (Id. at. .1n special· 1aws liJ<e ihe·- Rules' ·of-Court, Rule 11 _,(
379): .·. . . Secs:·12 and·1.3. ·\ · .
~-
Reason: This is tantamount to novation (/cf. et .Quajifications· of a P.ers·o·hal Bondsman:
37~: .. 1. He p<;>ssesses integrity; . .
2. He has: cap9city ~o bing him·self; and
Requisites of Material Alterations: · _3,·. f:le · ha·s 1s.ufficierit ·_prop'.erty to aoswer· for the
a: Change which imposes new obliqation; _obligation, which he guarantee~. (€/VIL CODE,
'. b. Added burden on the party prornisinq'" Art. 2082 in relation to>Ar(. 2056).
c. Which takes- ·away some obllqation already
imposed; and · ·· · . · · . . . Note: Judicial bonds. ~onstitute ·merely. a. spe_cial
· d. Changing the legal effectof a contract and . clas's°of ~ontracts of gu~ranty by;the .fact.that'they
not merely the form
. .-
thereof' . (Id. at 380).
. . -:. ~ . . ·, . 'are'· given ·' .i'n "'.irtue, of_ a ju~ictal order.' r0.erardo v.:
• I·. '•· P_Jaride/ .Surety and , Ins.'. .-.Co.,· G:R., No.. ~.-7807, .
Diligence Required of Creditor - . _ October 31, 19.56). ·
......... : .... "\ .
The creditor -is under no .:obl_igatjori. to · display ?nY:
diligence 'in the en,forcemerit of hi~ rig~ts . as . Pledge.·o·r'Mo.rtgage in lieu of t?ond.
'If th~· person required ·1a· · g i\/e' a legal
J
or
· . . .
judi_cial bond
c~editor (Id. at 388). · . · · . . . ·: · -· ;

/,at .
-should not be able-to.-"c;lo so, a pledge or:.mortgage
· Reason: · Nothing can prevent th~ creditor from , Sl!ffi~i~nt to coyef. the. oblig~tion .shall .be 9dn'lifted in·
... j~~Oedingagainst the principal at any lieu,thereot (fJNJL.qODE;Art. 2083). . . ·.

a
·.. No-benefit of excus~io~ for- ju_dici~I bondsnia~
· Duty of Cntdilor to .Account f.~ Lier} ·. on
Principal's Property . . . . · #{_ :.: ->··
If th~ cr~ditor ha~ a.c~uired a lien ~~~th_,.e gr~perty .
·n AJudiciai!11tn~srnan
to/~·
. :in~itl~d,
and Jhe .sub~sur:ety are NOT ~.
b~_(ie~t. Of ~-XCU?Sion ~8,C~·us~'f~ey are .
s.ui].11es· 1hose h~b1hty 19 · primary and_ s~hdary. (OE
o~ principal, the cre?1~0~ at onc~e~om~r,-chatg~? . · . · LE~N, s~pr~t~;t _,399). · .• : : . : .. · ·. :
w1th'the-du_ty ofretaininq suc~1sec1.mtyu · ..
Rule ~~en,/;_____l?erformance
L. · Ren dere d I mposs1
is: . "bl e
· .Any r~l~:se ~r impai~merit, 0t'.theAect,1~ity ~ .. Eve~ a s~reiy~p-~rfbrinance of the bond -is rendered··
. discharge th_e surety to the exten ofi-the-ValJe.?f.t~e ·· -g:: impossfb_le by, an. a·~t pf 'God,_ an .·act- of the pbli-gt:1~;.
property or hen (td: -et 390). . · · -. . .. &:· . or ari act _of law. It .is the surety's duty to 'inform. the

9or -,
e.ouit';oLJhe happ~~ing ·o(}he' ev~nfso; th.at it max
Defenses"; Available to . · Guaran o . Ag~insf take-action .or issue :a decree in the discharge of the_:
. ~-r~~!0Jro~ia~d in' A~;ci~ -~f-:h·~~~i~ii
2. · -Those available· to co-quarantors in Ar'tfo ei-207 4
.~06; ·
.' surety-' (People':-\,,:.:- Otjak ·,Omat; G.'W<No> ·1:--t 4457:..
June 30, 1961 J: · . ,. ·. ·-. ·
. ......
: ', ot the c"i~il· code; and .. · . · .: .; · -'..
. 3. Provided' in Article, iQS 1 -~xcept those ·_~hicli are
· purely personal to-the.debtor {Id_: EJf 39.q). ·
. . . . . . , I
. .
· Legal and Judicial Bonds' .· . \ ', ...:

• Bond • • I·- .... ' ' • • • • • • '-·, ... , •

0
•. -;... \ • . · :.N.ote; T~~·1a:.Vs:6:n·q~nv.~~iTonal pl~.dges ~ri_d chattel
An undertaking that is sufficiently secured- and nof · · m6rjgages are repea/~d by R.~_. 11057-or o.thf!iwise ..
cash· or . currency (Cornrnis'sloner of ·customs·. Ii:' .. koown as the . Persona/' Propfi}rty ·. Security .: Act · ·•
· Alikpa~, G.R. No. L-32Q42,"Novem/Je'r
. . .
26)1970).
. · .... (hereinafter._~J;PSA)., Ar(~.. 20~~-29_92 ,shil(. only be··.
. =:'. · relevant tQ real estc1te, m9rtgf!ges··"i1S·d_efjneaunder
.. -· .· A . boruf merely -stands' as guaranty. (solldary' -a Arts. 21,24-21-31 ofth_e Civit.Co'de.'.. , ··. ·· ·,..
guaranty) for ~· principal. obtiqation, whlch exists.
. ~iridependently°-of said bond ,·the· latter being mer.ely . .PP$/.,- was passed on August 17," iiifa· and do'ok .
·ari accessory obligation (Valencia v. RFC, ·G.R. No. · , . eff~q't on Septemper: 7, 2018. ·Natwith~tanding of
[~10749, _Apri/.25, 1958). · .. entry into force-of'R'.A. 11057;-the implementation of·
this c1c·t sha(l·be. condition.ed .up:on-1HeRegistry"heing
Nature of Bonds.· established-'.and operational under' Sec,· 26._of the
. All· bond, including Judicial bonds, are contractual in PPSA_ (R.k 11'.057,.· Se};. 6E3/". The- Implementing
nEiture: . Bonds . exist only .. ir:i'"::: GOnsetjuen·ce · of a·
RU/es and Regi.fla.tioris of PPSA; f9r.-the ·effective
m~eting of m_inds ·under the.·conditions essentiai to .a implementatlon of the statue-has not bffenjssued'as
contract (DE_ LEON, supra·at 399). of the date of printing of' this Memory Aid.·. . ..
. . .

?,(')]~ SA'N AF.DA,. AW C:F.:NT~Al.17Ff) RAR OPERATIONS I 671

 CREDIT .: TRANS-ACTION·S·
SAN'BEDA LAW CEN_TRAUZED BAR OPERA.Tl,ONS -.~EMORY•AID 2019
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Common Provisions of Pledge and Mortgage Pactum Commissorium or Pa'cto Commissorio

Stipulation-whereby the thing used. as security .shall
First Co~monafity: Essential. Requialtes (CIVIL automatically: become the property of the creditor Jn
'ceoe. Art. 2085):"(SOQA) .: the event of non-payme_nt of the principal oblig_ation
1.· Secures the fulfillment of a principal obliqation; in due time (DELEON, supra at 424).r.
2. Pledger. and . mortqaqor must be the absolute .
owner of the thing pledged or rnortqaqed: third ·By such. a stipulation, the cre.ditor would be able to
persons' can .. pledge. or . mortqaqe 'their' own acquire-ownership of the property qiven as security
property or . ctherv-person's property with . Without need of public sale or foreclosure. required.
authority and 'consent bf the' ownE!r: of the .... ·by law • (Id.).
.' 'j ~· -", . I .

property: pledged. ormortqaqed ·:10 secure the

principal obligation'. . . .- General Rule: Pectum cornmissorfum is forbidden
by law: ~nx.stipi.Jlatf9n to
th~teffE?Ct,.is declared' nulJ ·_.
Pledge or mortqaqe constituted 'by impostor .. and void (Sps. Pet; v. sos, Sentos, G.R: No. ,160'108,
General rule: l:he!"pf!:!'dge or nfortga.ge'iS vofd·. - Januwy 11, 2p16):. . . . .
\ . . ... ·. .. . . :· . ..

,~· .

;.
. . .;
........
.i
·,.
. ).
. . : ;._.-
672 I ,2ois·sAN.BEDA0W CENTRALIZED.BAR OPERATIONS
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SAN BEDA LAW
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. _,.
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. -.
-I MEMoni'Aio
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201\/

·. stipi.!lated period (La_nuza v. [)eJeon; G.R. No:· · The mortgage_e_ may ·1egal_ly. fore.close th~ re~I estate. _
· · .. L}2;33J, Ju.oe .6, 1967)". · . · . ·'· mortgage · extrnjutjicic;1lly · .. arid waive ·Jhe chatteJ
3. -Mortgage.e'$ act __ of registe;)r1ng the· mortg~g~d "mortgage . "f<;irecfos~r.e: "and" maintain. insfead. a
prop~rty if) -~is o.wn name upon,.the m9rtgagor'.s . personal. action : for .the ··recovery··~of the.· unpaid.
' ·.
faflure to 'redeem. the property- (Rfiyes 'v: Sierra, . 8a1arici/ qt. the credii" (Philippine ·aa~k bt comriierce
. · G:R:
~ . No.. t-28658,.Pctob(;!r)
. .. . .
1979) .. ·' .. · a; · ·v. Nfac_ada_eg; Q.R. ·N_o L-14:17_4, October 31,.1960)-:
. . . ' . . . -
fifth ''.co~mo·~~iit/ Conc~·~t. ·oi' P~;s'e_;~ion ·of
. . . \; "
"fhirq ,Commpnality: Kinds of Opligatior:is _that
Can J3e Secu_red ·.. ·. · · . · . r- . Mortgagee or P,ledgee . · . . . .
.. · Gapabillty tq'se¢ura··a11 ki,nds· ofobligatio.f1s (i.e. pure· ·Posses·sion_of:·!:l mortga_g~e .or_plec:lgP.e-is not_in the
. or conditional,' voidable;. 'urienforceable and ·natural) concept .q( an. owner;. th'u"s, .... !tie~ .9ubject". p"rop_erty_
(CIVIL °CODE, Arts. ~052.and 2,.0fi°1)._ . . . . . C~l)ho\oe· acql.)[red \~~oQgh}cquiiJtive 8rescrip_tiof,1~
.,. I . · t"· .. .- ••. ' -.\ • • ·-· r , ... ; f.. ,
·. unleS.:s, th~Y. ren~ur:icf !~eir st,atus as such: (CIVIL
Fourth .<;ommorw!ity: l_ndj_yjs.ib_ility · .· CODE-. Art: 2103; DE LEON s"upra at 480). .
. .. • •
. .,'· • ••. I

. A pledge _or-mortgage ..is indivisible, even though the .

· · d'eb:t .may )e· . qi_yid.~d 'anjcir,Yg '.' the -successors: .in : · Sixth Commor:i~lity· Retentlon of ownership. '·.
tnterest.ofthe debtor: or of. the' creditor (CIVIL ·coDE, . F,?J~~gor.:an_d-morf~ag~)I: ietaifl'.ci~n~rs~\p·._ofth~~ l~ing
-Ar( 20[i9f ·.. ' .··, '. · · . : , , . ~. , . _· ~ ... ' ·g~v~~:as· a'_secu_~itt~ld/ ·<. ~-. ~,. -." . .-~ ... :: ~ :
A, mortqaqe- tffr~-~ily. ~i~d.-imme.dia_tely-·subjects:._t~·e - ~ev~~t~. .Commcrialityi: Promise' to · Co~s-titJte
pfopertiupo_n ~!"licfi h is.imposed, ~fie -sarne qeir:ig · - Pledge o.r (Ylo.ftg.age .. , . · ·· :,... -, . <, , .

. iilcliv,islble even though tliedebtrnay be divided, and . A:· promise to constitute a pledge -or. mortgage, •if
:. ·-. -such indivisibility likewi~e· b'eir:i_g u.riaJf~cte~Lby, th,e ac¢epted;;,give_$ rise.onlyto a-pers:o[)al-Jight bindin_g
fact that the debtors are not soliaarily liable: (Dayrit:v. ·UP.On'.,the: parties cjnd' ~reates no. 'real_.right in the

.:".:· -~1-:,;:~tJvq.c ~:-.~93-~8, ~-e~_e:':b.ei2?)970F," :· · ·. ·.~!~{~~~~-~ ?~:D~'.':;r\;~~f(:_ ;,:·.' ~, .. :;, _. . · :.

· ·it presupposes several heirs.. ~ · f.Jott;?.: ~h~~tlts_~sy; only a n_g~~ of: act1~n .to_ compel
•i ": .· ·. -, • 'r _the fu,!fil~i:tij!J~O tlieJ?,:om_1_se t~er.e 1_s nsi plepgE! qu~
. '·co~·siq~eri~es ci'ltic(ivisibility:"~::. . · . :_. <.-;. · . . :_~rfo~~~;l\Y.~\fD~/~~-!",'{~P~~ at__ 14D):r : .: . · ...
1.,· ·singl~. thing'.~'..._'Ey.i&,J>9_rfi.G~ .. of. t~efpr.p.pe_rti , .... ··,. . ,, ·fi·-
... · pledged ·.or m'ortga,9ed is answerabl·e for"' th_e· . ,. 'Grfrninal Resp~on~il~HiW 9(Pledgor-or Mortgagor '·
f~ ,\ . , · .... , : . . . . . · .....
'whole obJig_ation a·s it f9_11s1due (BF/g.0N,_'supr:a- , ·· ·.Esta~iffec:i"6y"a·.pers6n'.who"; piete,:idingJo .
. at 4_3.6)., - : : . ' . .'"': : ... . . 7 ': •. . ' ;b·e the OWl'l.e 9f.ar:i~eal'pr0perty';,°shc!II. conVey{sell,r· ·

2. >S.everal-'things 7 ·.-all :of them. a'fEi li.aole ·for· the .,; . 'eric~mb~r or. ni6rt(:J°~9~' the·same or kn·owing thaf'the ·
.·. ··.:_ ~9(i)i_t~.of th~'1eof'_a:~d··(~itct~·d!tq~?o"~s~~j·(i,_~ye. i:e~l "pr9p.e'rty -is:en.yhIT)tier.e.9 _.shall clisppse 6{ tne
: · , ·: :to· cl1v1de .h1_s :.~~\1on:. by. ~1stnbutmg,;;Jlie debt, sani·e~as .u'nencumbered·(RHVISED PENAL C.ODE,
· ·· ·.<;1mohg th·e vanous_thmgs pledged or. mortgaged. . Art. 316, p?rs: 1- anct2J... ·-· . ,:· · , ,., · _.~· ·- · ·. ·' · · ·· ·
• .';,_ ·:~·(I~):. ~ -~~ .. ; : . ·-'.: ._'.° , ·· •. :• C ,\ . ?-,';' ., , .. · · ' ,., ·· ' 1 . : ··· •, ·.- . • . · , I

... 3'>. f'!either..the qebtq(s heirWh_o has paid-part of the ·"Rul~."on A~c.orr:ini:~datlo·~~-Pl~dgor-:~r·M·odgago~--
. ·. . de!br cai'.J as~ fot prcipor_ti9n_ate· extinguiW-QJ.ehl . . th"e accorrfrnodation pledgor ·. or m'ort_gagor ls :not
_noYcrea,~or's h~i~ V>(hq' rec'eiY.~-~:l::hjs:shar~ "of Ui_e,.. . .· .solldir.ily:'. B~~nd:'.'With·:-.ti+e:.priniip:at~obligor·"bti_t 'bis .
. ·. _ :debt to.return t~e ·pl~dg_e. or cance:_I the m6rtg;:ige , . ·1.iabiliW~e~t~nd.~: :0.nLy,, to·,:the; pr~p~rty .. _pledgep ,or
: ·: as· long. as 'the- debt i~ :no(complete"ly sati.sfi~d ·.mortg.agect:, In .'case.of defitlericy\the ·credifor:has .
: . :···· : _t<:;iVIL CODE, ArC2otf9;· Pa/s. -2_iirid°3): . -~-·. '-.. _t~~ourse':io·th.f;}~ P.Hrdp-~I ~f~btqr :Who."r~ry:iainf to' be
'. · . ·. · ·· ·.,.. )<_.: . ' ·., .· ·. : . · . ·.· • :primarilY,bciuria.Y:·:_·:·,. · .. ':.-··. -:;:. ··: . ~.: .. ··, ... , '.
··Exc;~ptions-to:th·e .Rule.of lndivisipility: · · .·.. : , · · · - '· . .-!.-_-: :: .:'/·-: ·.: _..:._ :~ _'i:\ ..:~. .· . :' . . · ''. ·... "
· 1 .. , . \,yh.ere ea"i;:h _one of ::iev.eral things guarantees· a0 : . :· : N"ot~:: TheJn'lalidity, of :a_:pledge or mortgagefdo_es.
· de\ermfnate''portion of'fbe .c~eclit; .· ·· . .-· .· ·:·; ·--~~ · . , not affect-the princfpal contract of:loan:'While void·;.it.
2·.. 1/y~erifohly. a p,ortiqr1''"of thE;J:foari>W8$ releas.ed; . . . _C_fl,_n:~'fill_ ~e. considexe~ ~;£an_ rr;,.s.trumen,t evidencing .
·- 3:>· Wher.e there was failure of.co"ri'siderat°fon/ . .. i~de,~teqf"!fSS. U:hilippine/.JY.a.tio'f1al Ban~ _v. {:?ey~s ..
. . ·4: ;Wh:er~·.there_:is no debto'r~cr~dit6_r r~lalionship
. v.ih'en·a third pa~y·is the pledgoror:.•m'ortgagor.
~s .G.R .. No-21.2483;c0ctober'.5, 2016): ., _ · . :·. .../ ..
.. ,.. . . . . . ·-. ' ,'· ., ..
5. Wlieri piecemeal redemption is allowed after. ·or.di~;ri1/: ;~· ·-~~;omrii~d~tl~:~ inortg~g~;,\~· -fi~~-
·. · ,foreclqsure tDE LEON; supra at 436:438): · '' : himselta recipient of· .the ldan, otherwise: tbat;would .
i . . •. • . .. , , .. ·-· -·. . -.· .· .be contrary to his _designa'tfon a~such (Sps, Ramos
N<;>t~: 'Mere·. ~.mtiodimerit :oi re~I. es.tate(mortgag~ a ' .y. Obispo, G, R .Nol 193804, -F~·br.uary 2?, 2013)., .-'
'an(:l"~ ch'attel"·mortga'ge-in ()f1e :~oq..ih'ler1t does'not. ' .,• i I ""
' . have: the effect . of' ft,Jsin~i: both; s~curitfes: into ari; .· ... \

indlvi~jb_le wh_ole· (Id at."439). . . . . . ·.. ·, ... I ; ';' •

...'r •

2019 SAN'BEDA lAW CENTRALIZEG>-BAR OPERATIONS I .673

 ·c.R.E-DI.T TRANS.ACTI..ONS
.
SAN·BEDA LAW CENTRALIZED OAR OPERATIONS- MEMOF?Y AID 2019

If there ls a deficlency, If there is a. deficiency,

creditor js not. entitled there can be no action
to: recover against the purchaser to
notwithstandinq any recover any unpaid
stipulation· .. to _ the 'balance. Any ··agr_eenient
contrary. - . to the contrary is void ..

(JURADO, Civil Law.Reviewer (20t9),··p. 1228) .

.. Pledge V.-. Real_M?~gage

found under Section -14

of· Ac£ No. 1508, as
.arnended.>-

. unless

-· '

·r
...
,·
.

.._. ·r
'

PLEDGE.
. .
·. l.
... .
· Note; This cH?pter isrepeeled.by RA.· 11097 or
ottietwise ~ngwn /JS._th_eperSO[l_ar Property .~ecurity' .
Act, ·eff.efF~fJ.-Sept_einb~r 7,_· 29_1a;· e;xcep( ih$ofar as
lh,e~e :pr_ovisions apply to. Article_ -2121' on legal
P.led(Jee.· may. ·cau$J The . vendor~mqrtga.gee· . :pfeq_f!es,-_whiq~ are ·c.reat~d:qy opereiion ofJa'v'!.·.: .
the sale ·un'Eler Art 21· f2: may' foreclose the, chattel.
. . '.' .. . . ·., ·.:·-.
·\·. \ . . : ~

.ofttie Ci,vil:.Code v..itieq .. mortgage, on ---the .. tkihg f P.S.~:_.IXa~_ pa'$_~_(}g_};J!l.A~g~§t 17,:_ ~Q1-~
§.ry_<j_ too«
' the, pledqor :failed 'to sold; i( orie has been ettect. on September 7, ?Q1 ~- Notwithstanding of
satlsfy., the . principal constituted.' should .Ihe. ' ~ri_try into torce o[.R.A. 1_-1.057, the.1f11p_f£:tjneritalion9f
obligation. . vendee's "failure - to . p_ay · ffJi$. ~ct s~a/J be c9pditfqhe,9upon the R_~gistry beJng
covers. · two O]", more · e.~taljlisheq -. a./1d operetione! under. $et·. 26 of the'
installments. s PPSA (R.A. rt 057; · Sec. 68).: The lmplementin_g
Rules ·and Requletkm« of. PPSA, . for ttie effective

67-...4. .I . 2019 SAN BEDA LAw CENTRAL.IZED EAR OPERA TiON~ .

 .: -C~EDIT·T.RA.N-SACTION·s
', • _SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019_
es,~ ,sA•++&t m::, .o:&,¥#45# ',1##7 !J¥2MSt M&·I 4§5rk.l &rlitri,M%A'®:..£#i,AAR#SJtAt¢±S:S:i&3$#NMU§si:Cfif&~· -

imptementetlon-ottne. statue hes.not been issued as and if negotiable, must be endorsed, (CiVIL
of th~ date of (?Tintingottbis Mem__ory Aid .. .- CODE, Art. 2095). . . ·. · ..

Contract of Pledge . .. 3. 'Effectivity Aga_in_st Third Persons

- Acontract wherein the debtor delivers thecreditor to The description of the thitjg pledged and the
or to a third person a movable (CIVIi.,. CODE, Art: date must appear in a public instrument.to bind
2094) or document evidencing ·incorporeal" rights.· third persons.: but. not for the -valldity- pf the'
icivu. CODE,. Art. 2095). for the purpose.of securinq contract (CIVIL COQE, Art.· 2096)." 'r. · ·:
. - · fulfillment- of-. ·a- principal ·_ 'obliqation with the
.. · understandlnq that -~h_en. the· obligation is fulfilled, . Object of "the Requirement: To forestall fraud .
'. ttfe "th.iri"g delivered 'shall bereturned-withall.its fruits . because a debtor might attempt to conceal his
and accessions· (DE LEON, .suor« at 442); . .property. from his creditors when he seesitirt
• .. . . .· •• ..J
.danger of execution by simulating apledqe {DE-
·-Nature. . . LEON, at 151). ·. ' -
. It is _{real contract which · requires i;l_eiiv~ry for its :
perfection (CIV/l:CODE,·Art: 1316). >,.. Note: The 'execution of", a .public. lnstrurnent :
. ·: ~ ~--- ~- . S8rYeS ~S a deterrent ~eCaUS8 thitp1e·dgqr-may I

An aqreernent to ple.dg~ only gives. rise to a personal be held criminally liable for. perjury (REV/SEO
action betW~~r:i · the contractinq parties · ( CIVIL PENAL .CODE, Art. 182)~ .
.. ,_
CODE; ,A·rt. 209.2)~ ·
. -~ . . ·· I
.
...,..·~
Kinds of Pledge- ·· · . . . . .
special R_1::quisites . . . 1. Conven.tional or-Voluntary - created by cont~act
In addition to the. common.essential requisites under' 2 ... l,.egal - created,by operation of_la·w.(E,:c~mples: .
: Art. 208? or
the Civil_Cod_e: · . . _:. . . . . .J -.,!}(Is; 5j6; 612,."-1,!3_1, _·1f!14; 1_994 and 2004 o_f ·
_ the Civif-'Code) (DE _/:.l=QN, supca..at 442): ·
1. - Necessity of Delivery . .. · /.
'.• ..
-: Possession o_f. the .Jhirig pledg~~ust b¢
. transferred to the creditoror-a thira~per_s·on b.Jl Characteristics:·(RAUN-F,.GQ) · . · · .· · · ' ·
_ c10_m_·mo_n__ a__g·re_e~~_n_! (.c_,_- vfL-
.
_ .:c_9D 7 ~- 2093_)_._
;.,,?."" ,
· 1 .- Beal c;;~-fit1a\t
..:_it is. perfected.by the deJiver-y of .
the thing 11)1eclged; · c:
Absent. delivery, the ,c;;r~difo[Jcquire~ ~·~Hight to 2. Accefsocy confract '--; its· existence .is dependent .
. t~e' pr_operty,_ b_~c~us~'/lfdg~ is. :!ier~lt ~ lien '·.._ .. : on
~~oth~r co_~tr_act (CIVIL pooE, Art: 20?5)i · : .
. ari_p possess10~ 1s 1~d1_spensebl~-t? ttje ngh.t_ 0f a·: - - 3~ ~laterral c0ntract'":"~ obligatio_n· is solely ·on tlie.
_ ,· · llen __ (DE LC.o_N. : , supr"B· Bl·4··4.t>J:·.. _· . •·•.. ,_:-: ~-·_) . -.. pqrt~ofij]j~epitor to return· th_e.. thing. Sl;JbJect
. . :.l thereof upori··-tne fulfillment 'of···the. prineipal .•
l\ipe o.f Delivery D~pehds l!po.nthe 8eculiar obligat\on; ·
. ·· Nature ·of tlie Thing·Pl~dged: . • . . . ·, ·
· : , ,. a. Actual delivery. - ~ctuaL_possession_ of~~ei....,,........--Nofe: I . f~tomes 'b_il~t,eral 'if c9m"t:>~nsa·tron. i~ ·.
~-. :-· . ·, prnperty pl~dg~d.- A mer~ symbt;lic d~i~ery paid . to a third~pa'rty. pledger biJt)e creditor
. - . . is . nbt.~S!j_fficien( e.g. 'animal. Wetita· v. . .. , because, it gives _rise- to· obligatlqns·:ao the p.art of
· · "" . Ganion;- "G:R. No:- 24137,,March 29792f>)J: · . both ."tfie· depositary ahd depositor'" (D_E LEON,·
b·.. C_onstructi~e.'.delivew.-.-§ymbolical .transfer ;,_ ·'. · supra at.4_42)~ · . . · . :. . - ·· .. -. :"' .
-ot:the-goods .(e".g. .keys "to a house, a·car, or.
: · ·a warehouse). It is·.in.disp·ensable· that the 4. MorhiDate - it has b~~i, given $pecific na'n;ie bY:- a
. · thi1i"g. pledged ._musl.-be. pl~ced under the the Civ11~Code·· - ··. · . . · · . ·. ·· -- ·
effective confrol,-_ a_nd'. possession' of ·the. . 5 .. .E_9rm~a(- A p;rticular. form .. js reqll\r~d. fo·r the '
. ·: pl_e:c:ig·e~·or- a third .per~on · (DE !-EON/supra . . .. ~on.tract; · . . . .- .. . ,: . . .-. . , .. :· .._. .·
- · .-. at-447).' - ·- 6. Qratuitou~ ·7 -tt'le bailee ·dqeS: hot pay the ,bailer .
for the' use of t)le thir1g; : . .. . •
Whether .or . not a symbolic- qr 'coristructi.~~ .... 7-: .Qnercius ...:. the ·.d_ebtor -gra.ht~·d, the :pledge_· in. .
delivefY' is. sufficient _to ·validate a 'p_ledg·e would . consideration . of ·the principal, OQliga.tion being
depe_nd:- on th'e--'peculia( n~ture of·-the·.''thing secured (ld:.at 442-443)'. · · ·, •· · ·· . · ·
-. . ·, ...... : .
r .·. ·.· .. pledged (Id.). ' : · . . _.., . ..
Ext~nt . of pledg~: Unles~ ,stipulated'.: otherwise, .
. 2.: Subject Matter .. ; . . ·. . pledge exten9_s to ttw .fruits;' ir:iterests or earnings 6("
All movables:which are within the commerce of the thing (CIVIL ~O_D.E,-Art;2102J.. . .
men, .-·prbvided-. they . a.re ··_susceptible: 'or" .
possession. (C/Vft. 90DE1 Art. 2094)" ~rid · Pledge v. Dacion en p~go .· -· .. . . . .
incorporeal'"rights ·evidenced by" dcicu.rrients of · In case ciFdt>Ubt as to- whett:1ei- a· transaction is a
title, in·which ca~e; the instruments "proving the . pi~dge_ or a·dation 'in payment, .ihe presumption (sin
: _r(ght "pledge9·:sha,II be delive.red. tcfthe creditor, favor of a pledge, the· latter bei~~ the · lesser
 . .

CR'Ebl.T-TRANSACTIO·NS
SAN BEDA U\W CENTRALIZED BAfl OPEflATIQNS - MEMORiAtD 2019

transrnission of rights and interests (Union Bank of do· so. -the pledqor may be held. liable for
the Philippines v. Juniat, G.R. No. "1"11569, August darnaqes (CIVi(CODE, Art. 1951). .
1, 20?1~. .
2. Not to demand the return.ofthe tning untilafter
'
Rights of. the-Pledqor: (D-BAA) full payment _of.the:debt, .incltidirig interest due
1·: Tei Demand return in case· of reasonable thereon 'and -expenses -. incurred for its
grounds to fear destruction 'or impairment- of the preserva~ion·(~/ViL:· _CODE, A~. _21.05); ·
thing without the pledgee's fault, subject to the
· Exception: Pledgor is allowed to substitute the thing
. ~u_ty
.
of replacement (Cllj/L CODE, Art. 2107);
. . '
pledged which is, in danger .of destruction -.or
·J.
Two,(2):Remedies Granted to the Pledgor: impairment wlthanotber thing of the same kind: and .
a .. To-demand the .return of the thing' pledged quality (C.JVJL_·CO!)E, Art .. 21'07). ·. . ~--,
·. ·: -upon ·ottering another thinqin pledge; or ··
ti. · Cause the same to be sold at a public sale.

676 2019 ..SAN

'
SEDA LAW . CENTRALIZED
. " .
BAR•'OPERATIONS
. -
 i&t Fi **'!'**:ffi ' ,e,a es.cw w . .
~~
CRED 1·T ·TRA-N·SACTI ON S. .
.~fi-$11'
.
.
. SAN·BEDA LAW CENTRALIZED !JAR OPERATIONS - MEMOR.Y AID 2019
5:4 •• :: ,. ~ w;i., .oc*<+ ,: , , ou.. :,& es:, * tt t"::sa I a~,®' t&R. :\~;:s' &:;<,AA;: 21-;s-t.;s,ee,;e? ii · >CB 321 7!11.t~
' . -' .
· 13. To Sell'at public auction in case ofnon-payment Note: The principal debt however is not affected
of debt at maturity (CIVIL CODE, Ait. 2112). by the waiver of the pl~dge. However, the.vtaiver
of the principal obligati9n ca~ries with it that of
Obligations of the Pledgee: (CUDA3R) .: · .. tfie· pl~~ge· (CIVIL ·CODE, Art._' 1273) ..
1. Take Care of the thing. with the· diligence of·_ a
good father of a family and. be- liable for the loss Neither is· the acceptance by · the pledgor or'
or deterioration of such (CIVIL . CODE, -Art. owner nor the return of. the .thing pled,ged. is
2099)•' . . ·. · . .; . . · · · · · necessary: ·
2. Not t~ Use. the thing .unless 'authorized by the
owner or
its preservation requires its use· (<;IXIL ... 4. .E_ayment of _the ·debt; .1 . , ·_. , · ·
5. Sale of' thing pledged al' public auction (CIVIL
,

CODE, Art. _2104); , •. ,. . .

. . . .. CODE, Ari. 2115);.and. . . .• ,
Note; The deposit referred to here is·ari instance 6. ~ppropriation uiYderArt.. 2112 of the Civil Code.
. of necessary deposlt (5 PARAS, supra ·at-1-104(
' - \' ~ . . Requirements for' ,Sctle •of T~ing Pledged . at
3, · Not to Qep'o?it the· thing 'with a. thirdsperson Public Auction (CJ.VIL C.OQE, Art.-:2112) . . .
unless so stipulated '(C.JYIL COQE, Art. 4100),:. 1. The debt is due an.d unpaid; .
4. Responsibility.for ~els of-agents and employees 2: Sale musfbe at a.public auctiol'); · ·· . .
as regards the thfng (CIVIL CODE,_Art. ?,1__00); 3. There musrbe n'6tiqe to the pledgor and owner,
5. To ·~dvise pledqor of any.danqer to _fhe_thingi.: · stating the amount due; an9 · · · .
6 .. To ~dvjse pled'gor of .the result of the public -4. SaJe must .be .with the interventipn o~ a notary
auction (CIVIL CQDE, Arl.,'2116); and . /. . public .. ·
7. To .!3eturn. the .thing upon payment of debt.:
. ~·~te: ,·f ,:in. u~/
c.o~tr~ct. 'or" pledge,. th~ pl~d~ee .is
aulhorizedJo sell· up-9n default: the:requirements. of .
. Article 2112-'of the Cfvil Cod~ must be com.plied with;
·· if the· conditions ·of the sale. are set forth already in
.the . con'tra_s: .,l,ixrtic!'e,. 2112 does not have to be'
obser:ved (E P.ARAS,
supra at 1110).· · . ·:· ~-

. . -~·c,~·e; Al~1e'l~·~2-. ~o·e~

1~~t· re~u-;re post.ing. o;tbc
. notice ofsale a,na pubiication,. .. Notification .. to the
; pledgor·:aoU~ ·_owner of·. the. thing pledge is
. suffi~i~nt. ·]'he s~le i~. exl'rajudicial in· cliaracter, (DE
· LEON; sypra ·at 4_65). .~; · .. · ~ · ·, :·

Note: The pl~dgee may·i1ppr~p,iate th.e thin·g··if after

the-first and second auctions, the thing is not sold.
Extin~uj~hm~nt-qf .Ple.dge:· (C~AP.:-~A . '. ·
· Hershall ·b~ 'obliged to give an ·acquittance ·for his
1. · The same _g_auses. as all other obllqations: ...
entir~ claim: (CIVIL C.OEJE, Art. 2f12);. -.. ·
- 2. .!3eturn.of the lhing pledged by J~e p]edgee to .the
pled:g.or (CIVIL CODEtArt1211'0); . . -r: . . Bidders at' the-Public Aucti~n .....
Note: It . is pfesurfied . that th~· ac~e.ssbry .. 1: - P.ledgor; .. : : -. ·.··_. .. :_ .. :· -. ''\ < ..
'oblig'ation.of pledge has.been remitted v41en,.th'e -~ - :_ . : . .: .. ' ..
thing pledqed.iafter its delivery to thecreditor, is : . · . . Note: Hei shall have .a· bet!~~ right rf,.he-should
. found i'r:i possession 'o~ the debtor, orof a third, . -, offer .the same terms as the hrghes~. b1dde( .
. person who owns ·1h,e -thing: (.CIVICCOOE, Art, .
1274).
.
·.. .
'- '
.. ., - :2 .. · Pl~dgee,. provided is· not th~ on.ly b{dder;
' . .ne
·, .
.. 3. ·Third.persons (DE LEON, supra at.466): -' ..
The possessionbyIhe debtor or owner of i~e . . ' • ' '

.
':.. • ~ •• : .~ • ':· • • • • ('' •• • • •"\ #

thing pledg~d subsequent to': th'e periection''of · Nature of th'e.Bids at the· Public Auction .· :. . .
the. pledge, gives . rise to .. a·, 'prfma fac[e
.. The bids.must be'fcir CASH.:.... for s·aid bids "sh'alrci.ffe'r
presumption that the thing ·has been retun:ied
and, ··therefore;'. itiat. ·the pfedge has:· 6een Jo p~y.
~he ,Pq~hase P!i~e AT_ ON~E" Hciwe'y,er;,i(\ti~ '
·plec;lgee accept~d any other bids, ft is deemed ttfat
extingui~hed but not the· principal obligation itself
he already' recejve'd the purchase p'ric~,"as'far as the
(CIVIi;..
.. CODE, Art. . 2110):
. ~· .. ~
"
.. pie.cigar 'is concerned· (CIVIL CODE, Art. 2114.;' 9
,. PARAS,a suprf).at 1111)'. . . ..
3:· Stateme'nt in· ~~iting by ·the pledgee that ·he
renounces · or ~bandons · the pledge .(CIVIL
CODE, /J.rt: 2111 ); . . .

2Bi9 SAN.SEDA LAW CENTRALIZED BAR OPERATIONS I 67.7.

 CRE·o-1T T-RANSACTION:s
. . • SAN BEDA LAw_ CENTRALLZEDBAR OPERATIO.NS - MEMORY Aio io, 9 ·
m+·~f#i«lf24&4S#tjWS #&ii?:&3 ..t:;;iSW+ANh§.M:;:r =,.;& .j§'tj·§¥Uti i ::;1enW4!&5£<2 ?&Mq;e,9 5&Mifem'#l--bta:zs §U@F4 ii

I.
Effect ~fSale of the Thing ·Pledged .
Extinguishment of princip~I _obligation;. ·whether or REAL MORTGAGE
- ..
· nol'the proceeds of the sale are equal to· the ·amount
o'f .the prin'cipal ·obligation, interest and ex.penses in
a proper.case (CIVIL CODE, Art. 2115). . Contrc!~t of-Reai:fvlo~gage . , ..
. l .. ..· . . . . A· contract whereby the .. debtor. secures· to. the,
1. · If. the price of the sale is ·more than the amount- creditor . the .'fu1u11n:ient. -c:if a principal . obligation·, .
due the creditor, the de.btor is' riot entitled to the .. specia.py subjecting to. such security immov_able ·
excess unless the contrary is provided. . property or· real rights over immovaf?le, proP..erty in
_2. ·. If the prite·of the sale Js l(;lss; the creditor is.not case .th13 principal ooligation is not·ccimplied with at
entitled to· recover.- th·e. defidency· i~ all- cases· the tim~ stip.l!lated (DE LEON," sup~a at.473). .
. even ifthere is a ·stipulation to, that effect ( CIVIL .
GODE, Art_. 2,115). '.· .. Characteristic's of Real Mortgage: (NASUl2).
1. Nominate~- .· · , . -· - · ·
· Reason: By -electinq -to sell the thing plec;lged -.2. ~ccessory - a _mortgage contract's validity
instead.otsulnq on.the principalobliqation.vthe . de.pends on the· loan contract'svalidity (Limteo
creditor · waives· ·.any other. remedy and ·-. must · v. BAP c;;re·dit-Gua'rantY Corti; G,R.. No. 204412;
ablde by the results ofthe sale (DE LEON, supra September,20,_ 20_}7). . .. --· , .
at 467). . - - .· · 3: ~\Jbsidiary;. . . . ·. .: .· .
, · ·. ·· · ~!:!nilateral - ·it creates. only an ·obligation on the· __
L;egal. P_iedge . . 'tp~f~ creditor mu}t ·free the property I\ :w~o.
Note: Article.?:21, th_e· provi$io_n op l~gal\P~5!,g§, r 1. V~omjl~ ~nq.1mbtanc~. once the.-o_bliQatio~ is
c':nnot.be considered iepeslec: byj~A.11,9.J!!.since. ful~ll~~ (13,E'bEON, sup~a at.4~3r . - .

. . · . . · /. _ r J' · . ·
. . the PPSA .deal$ specifically witJlas~/1_!i.tylntetestr: ,~ -§-.!~1v1s1~€?}(5 P.~R.f\S, supra a_t 111.6); an_d '. _
--~~~tedon~y-~ycontraqt(~-f-lJN~/~?;~~:.~.'ffe I- t !~sepa:_ab}p.,~~(-· .' · , · · · . ·
7.

Not~: 'T"S'~dfllla9e adtieres to the property; {O,: ·

The p~ov1s1ons on ~he_pos~ess1qr?,jare, c\~ _sale of. ~1 regardl~~=~,~~1t~ subsequent owner may be.
the thin~. pledqed goverri1i;i~1"'(cr,i_veritio~al\ plet1gm-,~.11·1iL1 ~--'~'
_are <jl~J?~1ca?le to pledqes ~r.eat~·d~1;>y ~eiationlq(-:-tJL~~- A m1~tgage ~ste_si~t!nvolv~ a fransfer, ~~ss,1qn.
J ... · \ "'· -, l . . :,. . ....
law. Unll~e. in ~onvent1_0~~): P.1~~9<.,Jhe1rerfia· der of~..;-.._~-:.: ~r e of p.)operty~u.t·?nly £Onst1~u(es.~ yO[PJ}f:a1·
lhP..
price. ?f'th'e. s~IE=n~~P,~ r\Y~P.nl\Q!
-~f! . Fin iHi 1,_'}/f!01'eo rq~~l:i:ON, SUP(E:·af'~97): . ·.. ·. ; . -> , :
~xpenses. shq_ll be dehvereCit' tJ tn\.eot~\~/V/[a : //d-'1:.~ ~{ -~: • . · _ , · · .: ""t_~/~';;,
,;:~~~ :~df;,!1~iedg .. ~y
s~ld ~~ly a~er:de_ma,n_d of _the ~n:io~nt !or whie::b~f
il~aii~~ 0 r~~~e""' .
.,,_ l"f'\f~~ o_!)~e-prop~~Y., of th~·~deb!or~~ort_Q~g~r as
··;;~:11~~1~,~~ie~~r:~ta;,~rt ,:am th~
th_in~ 1s r13tain~d. The·p~~hc au.cl10Q.:_shallJa~e ~ce~sec~yfolN.bef~fillr:nent o_f h1s-obhga_t1on., in·case of
w1tl:11.n _on·~- rn<?_nth a_fter suc.h,·demanal!{,07(V_9,(?cpJ.;>'E;'-=-s :ssreidefa~lt_.~~~ent (Equ'.tab/e -PC!-. £!!3.J?f<, l!7G. v. . .
~rl. ~~22r -.··: .: ., :- _ -.. _ _. ·:. .)~JlJ::J.fls:!?:~~-: ~0-.'._::~31171_.-oe.c.~t f~t9)._.~ .. ·
Re~son: Th.ere is n·o definit.e period-for.me payment .R.1ght to Po~se~~1on ._. - .- ·, ··: . _ -:-. , ...
of. ·the: princi_pal obligation· in legal -.·ple.dgi;i. }fl)~ .G_~ne~al Ru.l_e: The hiottg~gor, as·_a· f_l!le/ retain~ ·. · ·
p)e?g-:ee ._m~st,'.)h~frefor~;. mak~_ a dema·nd(without · _P?f~t3ssi9n of_the Pf.Op,erty :n:,ort!;]a~~9.- · (~~}:f~ON_;.:
V'v'.h1ch, he cannot exercise the· right of sale at' public -supra at_ 1?,9). · . ·,· · ·
puc_ti6n (DE.LE.ON,"s4pra.at 412):: .. ·. :.- .·, .,· . . . ~ · . , ~.-. - .. :·· . . . . :. · . .
• . J ,· • ~. ,-:. • ••• ·,. Reason~ By the r:nortgage, . the::deotor · merely
• , ., "· • • • • • ••

N.cite: :~ There is . orily ·one_ P.t,Jblic auction her~ (5 · . ,. subjeqts'..th:e·propertito._a lien btif d\i/n~rstiijfth~rebf
- · . PA[?AS, supra _at 1-1-14) . .'... · . . . ·.. ··:.: ... : . · . . ·. is not·p_a·rt.f~with (Id.}.~ · . .
• • I, ' ~

Re'r;nedy of Cre<;litpr in· Legal P.l,edg'e - .· . 9n.e's statu$.as q_ rr;i9,jgag_E:l·~ c;i;-i~ot btth~· _bp;l~.of
. pciss'es~ion '(Recebido v. People; $:R.- No. 141931,
The- thing_ plel::lge_d
. . .....
may b¢ sold.- only
. , . ' . ..
after d~mand;
) .. . . ... ·. Diice.mberA 2000): < )~ ' . . . .:, ..." .
!he_ P!Jbl_ii;· ?4Cyon :,~haH _tqK~. p.l~c_e-.:v.1trin· ocie m.orjt.h: . . . :'>. '( .. •. !. . ..'.
after demand and 1f-.the creditor does not·cause the - .'-• r '• .. : • •

sc1ie-_to be~ ~e1_d· ·within su_c·h Pirio.d,_: th~ .deb_tor.i:n:ay E~ception:. lf'there is.stipulation. io ·the contrary. .
require th-~.retuin of thing (CIVIL G._ODE, Art. 2122).
(0$ LEON, supr.a at 480). . . : .-_.. . . ' ..
... . ...;. . . •• ·~, • • -· I • ·;. • I • ~ ,• • ,.-· •

:.... ·if
. No_te: is ~at ~n ~s_s·entlai reqt.Ji~ite:of·a· 6onir~-~t .9f
mortgage that the pr0perty .Q1or:tg'agl;ld-remains.(n the .
possessior:i of the mo_rtg~£16~ _(Id. at 481 ). · . ·

: .

,_· 678 201$ SAN SEDA LAW CENTRALIZED_BAR OPER,A.:rlONS

 CREDIT.·TRANSACTi.ONS ·
. SAN BED/t LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2oi9 .
itDMifr&S4%f friSWWii»MF:*2f9Wiik&W441:*%3W·*!5it¥W!Nszt!¥Mi3km3¢tf,,4wM@i&3l8&$_f,&M1M ti, M&;,; .. rl2!fySAk·" 9it@iit; fltllm .:

Opject of Contra~t of ~ortgage - 3. It. must ~ereco.rd_ed in the'. Registry of Prop~rty-

· f. : Immovables; ~ (C/VIL CODE,:,Ait. l125). Reg.istration in the
2. Alienable Real Rights _(CIVIL CODE, Art. 2124). registry .of. property is- .. necessary to bind third
.. persons, but not.for the vqlid(ty of the ~oritract as
. Cause·or Consi~era.hon i_ri Mortgage" ..· . between 'pa_('ties~to cl mortgage. . .. .
Its' conside'ration is the same.· as of the -'princip'al ·
.. . . . . - '. \ ~
contract from w..hich it receives· its life, and without Regis.tra~i6i:i of a kEM deeq is not essential to its.
which it cannot. exfst as ari ·independent ·c~ntra·ct . validity ·as the law is clear on the requisites for
(China Banking Corp. v. Lich'auco, G.R.· No. 22001, the validity of'a mortg.age in.Art. 2085 in.relation
Nov.ember 4,-1-924): ·. · ·· ' · to Art.: 2.125. of the New_:Civii cci·de (Coca-Cola,
- . Bottiers Phils., Inc: .v.
Sps. Spriano, G.R. No.
· -·· A m~rtgage · fs a niere· accessory cont.ra.cf a~d its ·· 211232, . April 11, 2018): .. .
· · .· validity would d.epend on the vali.d[ty of the 'loan . .
1
'./

:.. . secured ':by ~Tt. .. Hence; tne'. co,risideratio.n . ot the ' . ~ight. jn:Cas·e·ofL~iJ~I .r.i!'cirtgages . .

· mbrtgage·con°\ract. is the same· as thaf of.the principal · The P._eri,l'ori's· in· whose favor 'the law establishes a
.. · . coritract 'tro.m which· it receives life,: and witho.ut t9
m9rtg13ge ha~ th'e right 'de,marid the ex~cution an'd
. ~which it' cannot existas an 'independe'rit contract. ,-,·. : I the recording of th~ qo~ument-in .which the mortga.ge.
The·debfor cannot esc_ap.e the cqnsequences o'f tbe is formalize,d {Cl~/':- _coqf=, 1;1rt. 2_125, par. _2)
mortgage.contrad ·or,ce the;.validity of .the loan is
upheld (Dev.elopmentBank.of.the phi/s:.v.·Co(Jrl of. Order .of for~clo'sure cannot be ·refused on the
. Appeals, G.R No. qS703,· June 39, 2006): ··: . . ground. that the ·: m,ortgage was not registered
• r' ' . ' '
provided no lnnocenf'third' parties are involved (DE
Special "equisit_es: · · _. . . _ , . .Lf=:ON, .. sepra :at. 485).;·~ . .- .
1. It can·,·cover ·O,nly. 'immovable property: .and. ·--' .. - . °":'
alienable rec:11 rights, im.posed upon _immo\latfies K.indl~~Mo- gage: . _
(CIVIL; (;ODE, Art: 21-24);. . ·• ' ·J:: Vofanta,JY1,·:.... aqreed to by · the · pa rties or

:·. Note: .. While a rnortqaqe ~f ·land ne1;e~sariJY

7j,ncludes,
·. _ prop~1f r~.
- .: coristitul~~·· by' the . wi11 ·· of the{. owner of . the'
_:whlctl) !~ cr.e.at~~ (DELEON: supre -

.=
: .. .i~ the .. a.·~s.en~e :ot i;J!pi;iatioh~ fne, .. . ,, ' at-'474); . . . . . ' " .
· ·improvements. thereon.ia buileing_.its~lf'may b~ 2 .. ··.-Leg~?- re·q~irid by. law to be execute·d_ i11 favor

...
. rnortqaqedapart from the 11n'd,onwhicti it is"~uilt

. : • • .
tial .Bank_ v. Pani~,; GR~~~-
August 31, 1987): .
• .•• r , •. : - ·' • • . '
.
1 -~o.o e8
."
· ..
• .
of certainrpe,rson~ ((9/Vl,CCODE, Art. 21~5, par.
2Jt1111cf<f:0D'Ej:Art~·· 20'82 and 2083( . . _ ._
3. · Equitable -... altlfouqhlackinq the formalities of a
• m_ortgage, shows .the intenfion of.the parties· to .
· ·_. ... · .: __: Fut~re property cannot O!:) an object of a contract "-'---·',make· the -property, a... security for. a debt· (see -
.. .,. of rnojtqaqe (CJYI~ CODE, .. Ad: ·2jJ~,.par:' Q). e{VJL CO.DE, Arf.."1602}. • -:
·. ~. However.. a -· stipulation .subjecting. _tcy'!be~-""""'--- ....... ....., . .
· mortgage llen.: properties and .improyem~nts Plegge··~. Riial !Vl~rtgage
(after-ac;qu.ired f/?Perti~s) a~g~d.to~per~~. ··,· .. ·'r:··~·~w.;-·~~~if""'">;ij
. '.: aJready m.ortgaged which the· mortgagor-· may ·
subsequently ~cguir~. ins tan; or use.. in·
. conri'ectfon with'·re·~(propertya'fr~ady/mortga'ged·
· - '· geJon'ging tot.he mortgagor.is vc1!i.d (Preside·ntial · . ,
·commissiorron Good Govemment;v, Office ofo, ·, . ·. :'mc:)VablEis.
'-the. Ombudsmari; : G.R.: -,l}iJ __ 19p96i, Apr;i ·18, .:
- 2'018). ·.
.-- :··
. ~->. ,

2._ It mus_t · appear in a public i~strurJ1~n~ (CI_VIL. ; · _

C(?DE,· Ari,. 2~25);'
· Effe.ct when ·mortgage · is· 'iri · a_ . priva.te.
- ; .
·-. documEi°~t . , · ·.· _ . . No~ \,ai'id ·ag~·lr:ist
. thir'd· N~t \/~lid,· ~gai~st. 'tkii-d
. No. \/cilia· mortgage is constituted· (Hechanova v'.. persons· . . witl1o'ut p·ersQ"ns ~ . without
",;. · .Adil, .G.R. No-: L-.49940, ,septernber :25,-:. 1986F · · .knowledge, .. unless· _-\1 ·knowledge, · uhle_ss
- . ·· The ~r'editor may _red;)Ver th~(loan and has ihe descrip~ion of' the thing: regist~red. ·
·· · right to cor;npel the debtor. to execute a coritract pledgep and the. date- of- .
'of. ··mortga-ge Jn a
p'ubtic i.nstrument· ·(CIVIL_ pledge.:'appear in a p0blic;:
CODf,."Arts. 135iand 1358). in~trument. ·'

·"
r,n,n cA~1 ocn.", /\\Al rc"1Tn~; ,,en OAn r'\nCO/\Tli°ll\lC I t::.70
 C:flE'D IT ·TRAN SA.CT.IO N;S'.
SAN BEDA LAW CENTRALIZED BAR OPERATIONS~ MEMORY AID 2019
~#ifflhf4£4Qfof&~·Z..'W?R -wsm: ~:P:.a~ ,e.stSt th@ Ii 5 g~ i#bt@,~ii§,'M1F?WtZSl'.r
#+$£$$
.
f&H#ci · i&24A\£24#iiULU$t¢fiH}Etti54·4f¥4;)iJ

owner (i.e. his right to.oispose) {McCullough v.

Veloso & Serna, G.R. No. 21455,,April 5, 1924) .: -r

. ~. > - . • . ·,;..
, .
·~ P'le.d~ohan sell the thing' ;Mortgagor:can. sell )lie
pledged only with . the pro:perty . mcirtgaged
consent of the pledgee. everr ~iiho.ut · : the ·
. . .• . . . consent . of " . the, .
rnortqaqee .

. (DE Lf{ON,· supra}t _415~416r

Real .Mortgage v .. Pecto :de retro sale·

-·

.. , .> '. •

. .. ' . . /' . . .. · . . ..· ·, .... •

2. jtcreates.rnerely an ·~hcG/ribra,:,ce~ .A·nro·rt~ag:~

: is. r'Jierely. a ),ec;urity'·_ f9.:i-' a debt .a'~cl:' _a,n "
. ·encurj,brante upon- the· p'roperty: ·-:1t:.1ci'es . hot
extinquishthe title of the debtor who remains the
• •• • • . I

. (

.680 2019. s:A:N.·.BEDA LAW. CENTRADZED

. SAR.. OPERATIONS
. .
 CR-E:D.IT. TR.ANSA.CTIONs·
SAN BEDA LAW CENTRALIZED.Bl!R OPER.t\TIONS _-·MEMORY AID 20!9.
. . '
I a, ! 8¥6#:t,,SF'Wifu.Y akie,:~a I., !3 N:!b iMf8§ et::§+§ g.; fi!Zff §it.':,... Wt ?•!'tit &-Jd-(11! ;.ge•&.¥f4:3iii#P
.. .
'* >f3?!r1·4 65? <ew«lfP2;7,cl/JiJ~~~

The doctrine does not apply to a situation where the Rea·san:· The ownership of · sti.ch accessions;
titleisstill ·ir:i .. the name of.the rightful owner and the. acce.ssories; and improvements· subseql!ently
mortqaqor is different frorn the person· pretending to introduced·.also belongs:to·the-mortgagor.wtib·is the
be · .. the ~.owr:ier." . The mortgagee shall . not be owner of · the principal , (Midway 'Maritime and
consideredan innocent inortqaqeefor value-and the . Technological Founda'tion v. Castro, ·G.R. No..
reqistered. o'«nei will -not lose his ·title·. (Ere(la v. 189061;° Augu${ 6, 2014).-
"Qiletie,r-KauffrrJan, . G.R. No. , 165853: June 22,
2006J: · . · Exceptions: .· , ,
1. An express stipu.latiol') excluding them;~and·· .:- . ·.
Diliqence R.~.quired of a 1Vl~frtga·g~e~1?ank , .' . . .. 2. There, is evidence suff\ciently. ·ov~rth·rowirrg Ufo .
lf,the rnortqaqee-is.a.bank er.a.financinq lnstitution, - presumption that the mortgagor .._owns ·:the
the qeneral rulethatra.purchaser orrnortqaqee of mortgaged. pro.perty. .
· 1and is not required to look further than what appears
-co. the· face of the Torrens Certificate, of Title-does -.. Note: Article-2127 of the Ci~il Cod~·is irrelevan:t
not:.ap:ply."°(Premier Development Benk V; CA; -G.R. - .. ~- . arfcl. inapplicable 'to mortgage)~ anq ' thei~
Nos.i: ?8122;:128184_.'&·,·1·2.8229; March' 1.8,.2005) .. foreclosures if .the mortgagor is later .fo(.Jnd or
. . .: .: :::.< ·-~ . :'·:;"_-::_'.-::.~ ". ·, ·... · .., : . . declared tobe npt-the·'trueownerorthe·propefly
It ·i~ settled .that banks, their business being .(Philippine Nc!ti6rial Bank'v. Sps--:·Maranon,·B.R.
impressed ·.with <public, interest.t.are expected to . _No. 1°89316, July 1, 2Qp).. · · · ·~' .-,·:
exercise more <carerand .. : prudence vthan 'private , .• ; . . . ·: ~ . . '-: .·> : ·: :;" :.: ., i, .., . ·..
indiylduals in: thelr-dealinqs; even those . .involying ~egistratiori of M.ortgage . - . . .·,, ·-, ,·.
registered Jands ,· (Bhilippihe · Atneneh .. Bank v, Once a mortgage has been signe'd,inJ:lue·.fortn, the
Contreras/G;f:?:. N'o:··.1;731.68;:Sept. 29,·,20.14) .. -, mortgagee is entitled- tq.its /egistratiqfi.'as,a matter of .
· rightJqE LEON, ..supr?I at 49_1). ·.: .. ': ··.·.·.' . . ·, .
_ra' be considered a mortqaqee in good foith, a bank .
.: should d,ilig~ntly con~uct,an.ii)V.esti~ratioA:oJ.:tl:illarid · Note: R~gistr~tib~ is; n6t' a '"c;;claf~ti;·~ .state tiy.:°ttie
offered· as.collateratJnls is especially.applicaqle inl that su-ch anl\_nstrument -is. valid ai:id· sub'Msting. · ·
. (
cases. where the subject land:was·riot-m(2r;tgaged
- by
,, .. interest in th~e aig. llis o;igre_ly.~0decla.f?ti?r :~b~t the
. th_e ;~w~~r;: t~il~_re(fo'.,:exer'?iSe.. ,s_uc~ITg'inoef~h~JI. r~~-orc;IJi!Jhe ~ti:t~~\\c!PP,~~t$ '.·t9, b_e. ;~~rd..e9~~;w!t~ the ..
.not entitle. the .bank-to. p_rote0t1on under~Jrre·.1a1· mor.tgage'descnb:ed ·(Id. supra atA92). ,1 , ·

(Argu_e/les Y: .Malarayat>Rur_al..rBank~.lnci;, GR. No ..

.-.. 200468,. tv1aich 19;· ~q14). ,· .~ffo~ 1:-~~~;~tra-ti~\s_.;o --~~e; .gt. :s~~i.er::~\i~·~
Third F.'af.ti.es ·· · . .;, . ·.. .:. . ·· ,} ·
M.~~g~.g~;:G;~·dit~~v(·J~}~ment C~JHto ;· A regist~red m6tfg9ge .. righ{9ve(: p_r9perty' pfevi~.tisly
. A,, niortgagee-c;:r.editqr. is ; ,n_Qtc !'>Yn~n}'f:}'.lOUS -to . a ~-old /s. I~.te.rio_(t.o:the .qyy~r'~ W1r~~!?.tere9 rjgh,~. (Id.}.
j(!dgrilenL creditor. : ~_:"-.While law expects · a ·Jne
rnorfgagee-credjtor:._ to'-· inquire: .as . · a re;:isonaoly Repson: If. .the_.Qrigina·l ,own!:r ·hacl s~~(tii.e t~ing,:
, ·Pr'l!dEfri_~.mari __"':'?U:ld. ~eg.~rdi°!:19 :th'.Er_e.ncJ1q{brann~sfon · then . h_e'. ()0 rori~J°e"r h.as tti'e ·.9.~riership ahf Jr~e .
.. the -prop·erty,cm dispE?S~I of it ·~o.):is ,to b1(a~l~~t9 mpft~-~g~ .iJ _(9tate
.. . ··ques.t1on,· noi. .
such kno~leage. '/
1s.
.
. imput\:?9. to _ajl.Jdgm~nt creditq:r.yvho merely·se~ks·\he Investment House,"-Jnc: v... CA; G:R: ,N6 .. 115548,
March 5, 1996).. · - · · · · · ,- · - ' . ..-,· ,, · ·- · ..
. sa\isfactio"n ·of
.th~. judg111ent aw.arded'-in his ·favor·
(DSM :"9ons{ryctiqn- -8, ·. Dev.~lopme!J(. Corp. v:·· CA,
G.R.-No.· 166993,' liJeeembet 19;- 2005).··. - ,: .':. When·
•• , •
th~;¢:_.:·
• •• • t
ls ... a ··: Pr~B{biti~·r(' .Ag~in.st-
• . • .) •. .- • • + • ' • •

. . .·.r·_.- .. : ,.:,.: . ... : :: . : . . ~ .. . •. . , -~· : . . . E_n~~~prance .:. of, M.?.r!ga~~<t ..::_land, .. Vfit,J:iout
.. ·E.:i<tel')t.of IYJ.9rtgage' . ' Mart·g_;:)gor~· <;oris,e_!lt.'.° . ·· : .... . . _ . .. , , ... ·~.- ,, ·.
General,rule·: . . . ' . . . . ~· . . · · · In tlJi$ d~se,. rights ovel thEf property; ~hi_c)l. came
,. . . . . ·.·. -.. " .. ' -
. .
· · Mortgage exte.nds:to the following: '.(AIG~I) ·
... ·,:;,. . : .
i~to exisferic.r(aftE3r there.x~.c~tio,~·Qf the}:l~e~!~~~d i.~
·i
·' . -1: . : N~'t~rai 'Acce'ssibns; . :·: ·. . . .. " ··.· :· ~... \1iol_atipn ..b.f tM agreern.erit, car;mot.be a.pngtated as
2. Improvements;· · · . ·.an ac;lyeri~-cia_im ··on~Jri·~·- title. o.f t~e, l~~q oy'e,r- th:e
. 'i ·.§rowing:fE.uits; . .•': ::~ ' mortgagee'.s opposition (Riveca v.,Pena, G.R. . No.L- ..
1
11781, March i4, 196Jt,,. ·. ·. .. ' :'., ! ..... ': ·
· · 4·. . Bimts 'or irtcom~. n_ot' xet. ·received .. ·when the .. . . .· . .. : :· - ~: _.. • . . . . . . ·.. . .· . ..
..: · . .obligation beei:o°rnes·due; ·an.d . ·! : •• . r • • • •. ~ , •• ..~~ . . ,,,. • •

· 5 ... · ·Arnqunt of !ndemi:,ity granted or: o»'ing· to the ·. Subse·quen.tBe~istr:~~ion. of .an,A,dvet~¢ _c;11ai.rry
. ·<· . proprietor frci_m: : : . . . :·. i. ·: . . . : . . . ~. .. ·. . A prior registrl:ltion cif 'a'..lie·n · Greates a prefern·ncf
a. The insurers ·onhe property mar:,aged; or Hence, the subse.quent· ·annotation of· ·an adverse
. .·· b. ·Expropriation for. pctl:)!ic use (CIVIL CQDE, claim ·cannot" defeat th.e rights of the· mortg.agee br
A1: Z1~7):i·,, .• ... . ;' . ; -· . . . .: ·the pi.irch~~er,at .t)'1e\u¢tio~ sa.i~ .whos{rjght§ are
.... ·c:l~rive'd frorn.,a· prior f!)Ortg'age validly register~ci· (DE
LEON, supra at 4,93-4fl4{ ~:. · · · · . ·

·. 2019 SAN BEDA-LAW CENTRALIZED.BAR OPERATIONS I 681

 CREDIT TRANSACT·IQNS
SAN BEDA LAW CENTRALIZE£?BAR OPERATIONS- MEMORYAID -2019

Alienation or _Assignment.of Mortgage Gredit the document evidencing . the subsequent -

The mortgaga credit may .be· alienated or·,assigned advance -refers to the mortg~ge · as providing
to a \hird. per.s·on, in whole or in part, with the security therefor, In thi,s .case,. the · security ·
formalities required by law (CIVIL CODE, Art. 2128). . specifically exec.uted for subsequent loans must .
first be exhausJed before - the mortgaged
Th~ mortgage credit is a real.right and directly and property can be· ~esorted to (Prudentfal Bank. v.
immediately subjects th·e mortgaged property to the- · ·Alviar, G.R:·No. J50197, July ze,
2005).
fulfillrhent of the principal obligation. The assignee·
may fore_close._the .mortgage in case of non-pa~ment · Note·: The Supr.t;!_me Court clarified ·that if .there
of the mortgage- indebtedness (DE LEON,' supra at is :no reference in th~'·security ag~een:,enl for'the
· 506).. . . :new Joan- or· obligation, then do· not .extend the
application oftne ·dragnet clause. .
Note: Even if the alienation is not registered, it would
. sffW··be valid 'as ·between the parties (Lopez v. -subsequent . loans, need .not be separately
. Alva(ez,. G.R. No. L-3438, October 12, _1,907). annotated on the mortgagor's title in.' order to
· . , · · . bind third· parties (Mojica· v. Court of Appeals,
Stipulations on.Mqrtgage Contracts · G.R. No.· 94247,· Sept. 11, 1991). ·
1 .. ·1n.cl.t..i.ding After-Acquired Properties· . ' .,,.·: -· . . . .".·- · · .. · ··· · · ·.
Status:. Valid
Purp~?e: To maintain, to t~~ exten~ ,~Efrl b~
. the.' c1rcun:,stances, the oriqinal values ~he .
.
1u
~urpose:' It' operates: as .a- convenlenceand .an
-}(-'ta.e.;..c?mmodati~~ to the, bprro~ers, as it .nia~es
V
1. ~i~le ?dd\!1.~nal · f~~~s. w1th~~t the partles
~rop.erty·g1ve_n as a security:·. · ~~-!.·. . .~- """'l'.l{1y1~g '.~-e~cute.a~:d1t!.on~I s:~c~nty documents
iti · ti '. · , .b .
S UC h S 1p_U 1 a _IOn '; IS . Cor1}.f!l0£(. )':.ye\e
h .
_e "
...,..t.
. (Moj,161 v~~ourt of App_eals, .G.R._.Np. 94247,
--..S·e"'i 1·~·991j . '' ·. . · .
·.:~~:=~i~~ ~'.~-~i~a.~fe
· ·· · . t 502)
t~~b~~e~~~tY~1~~. f
· Vf
w,·:· ·c·:~p(
t'.'. ·. ~~t_.
·. , • p · .. ·. · .f·.. th' ... ··t -: ·· ...
. ,n. ~ _ lt>~ onf r~c~_~n... ~~.vi.s1ons .o . rs. na ure .are
-, =tupr?! a.... ·. . .. · · /. :. . ·/ ~ careJ1:1lly.· ·s'c!ufuJized and · -stri?llY': con~trued
Note: · Afte.·r-a·c·q~u·ir·ed
. -
(mprov~~~_n.t~. ~r
.
~OP. ·rt.
Mr e res ·[
efe r ·· to · i'.1
. 'fi ··- ,il-,.--,~~f l~h . a
,:paF.t1cularly w~tlie mortgage .contract rs one
vp lit D ·1 ..
ac_c:e,ssfo~to: a proAer\y)_f.tat,A. :1'1t ~~ al' -~:51on~,~ .. rer,~:e. __ eve OP,men_ : an v.
tB k .

DA\. s~Me~f ... ~l;Ji;:;b(~~"~,i~:163g)~

. !i~~ru~ire ~~9rtpgea~·:~)t.t~li.s~ ~~~- Inc_, _GR_ ~o.
.. ,.. . . . \tf)\ ~~ ~--· ~ - '):?! I>;<; ~.
. ?~i~:-lien·~·~aches ~ind ~ests n~t.~t the~rfl~s.~icfi:]j ~~ ~~~rtg,ge .· _given.: . ·se~~re:· :_t~
f_utl:!re .
.- imprbvehients are constru°'cited bU~on tt,e<a1t'e;'6f~~}an_cerents_!~ ~ c~r.i!lnumg s~cunty,apsJ_is not
-·:, . : . · · · : .·. . . ·· . ·· · .: ~I~ · d1scharm~d by retayment qf. _the. <!mount m:the
__l._~e recording _ana reg_1strat1011 of .t'1('de1edco~ . . i':..:., rt-'r : th .· f ·ill. · l .. f th ' .
· _. mortgage (ll.Jzon Lurr:,ber Jf Hardw.a.[~ Co'-''--.] EN"'1'\~>91°:,..;..Q~ge! u~ ! · . ~ u 11 . amoun °, ~
.. Quiambao, ~G.R. N<_J. L-5638,' March 30 ~ 1g5~~ ;,g,dvan~~e_I).ts ~re. ~ad~ !~u/Ja!T·~·- Lu_tero,-~.R.
_. · : .·' :· · · '<~t)g.· v:.
2.
·8·1.c}n ke t o_r., .. t erause
·· 0.ragne · . . · .
·· · · .[jJ.. MI\
~ol~~285f,Dec.9!._.19?6,.:frader~ Royal B~nk
~SP.oJfef .· .. · . r.!.R.
·· ~ ..,.. .. Castanares;: Y ,. ·No.· 172020,
· · SJ~tus: ValJd. · .· ... Qe<;!;,f!1b,er. 6,:_2010). ,·. ·: ·

. 1.~:.·i~' spec_i,fic, c1lly .P.brase_d to...s~bsum~ an' debts.~.<?;~

· · ·
3· ; F6. ~bjdaing Ai:ie~~ti~-~: of,Mb.n~~g~·d.Prop_ei:ty
(Pgctum:De Nqn-Alierjand.o}"'' ... :. . i:· ... '·
·...
past .'or-' futur~ Q~ig)ni. Mo'rtgages. o( th_~s. .status: Vqid (CIVl,I,.,'cQOE, Art.,2.130)., .
thar~cter ·enable· ·! the parties to . pro\lide .
. co'ntjfJUOUS dealings',. the ·_na"ture .. or ·.exf~nt' of ·.. R~·a~·c;ni Si.Jc;!:J··~· p~~hibition ~oul'd b~··c~-~\r_ary lei .
:. _w~T¢h ma_y riot· b_e. 1<riqv/n :clanficipc;1ted -~t th~· : th~. pue11c._good).~a~_r:nu9 :o a~1~·e -i~r:isrij.l~~io_ri of ,·
·time,·· arid · they avoid · · the . : expens.e · and · property; should. not be ,o.n.duly. 1mp_eded (OF .
· .i'r1cor:1.venien~e~of. E!Xec(Jtirig .a ne,;y· security· Qll . LEON, supra at·507) · . ·. . . . .. . .
'.: e~c;;h ~ewJra.nsaction (DE [f=ON, supra ~t_5Q:)- --~~~e:. In- cas~ :of.,aii~nafio/ u~;
tra~~fe;e~ 'is
q04).· . . . ·.· ·_ oound to ·-r~?pe.ct th; encumbr,mce · (CIVI_L
.A mo_rtgage with a dragnet clc')u~e is an "off~r"_~y · COVE, Art. 212g) 'bec~Lise being a (eal.riglit., the
. the mort\;j'ag,or to the _bank to.pr<;>v'ide f~·fsecurity, p'rpp~rtyremains subject to·the·fulfillment ot the
_.:1~~~e~i:~~~-~ge;for_ ~dvances of ah~ wtien.the,:' . obligatiorifor'whqse guaranty i_twas c'q~stituted
. . (DEI-EQN, sop'ra at 50~). · : . . .' , ..
. Ex¢~ption: ltc:an b.e said.that the "offer' was not
4.. Stipuiatiqn Requiring Mo'rtgagee's.'..Consent
a~cepted·_.by_. the b~nk' when: a ... sub·seq~en't
· Before Alienation. • . · .
· ·a_dvance was made becau·se: ot:a new security.
Status: Void for violating Article 21.30. of the .
: A m'ortgage· c·ontaining a "dragrjet claus·e· will
'Civil Code. While ~uc~ provision '·poes not ..
. nol b_e ~xt(;lnd(;ld'Jo. cover (1,1ture advances unless

6.82 I 20H:l°SAN BEDA:LAW CENTRAUZED. Bf>.R OPERATIONS

 .
CREDIT· TRANSACT.10.N S-
. . . . .
S(IN BEDA LAW CENTRALIZEDBAR OP_ER~-TJONS- MEMORYAlf) 2019

absolutely prohibit the' mortqaqorfrornsellinq his . Spe·cia·I Rights

mortgaged. property, what it does not outrightly Right of a Mortgagor: .
prohibit, . it · · nevertheless achieves. . The To alienate the mortgaged property, . but · the
. rnortqaqee can simply. withhold its consent and. rnortqaqe .shalltrernain ·attached 'to the. property
thereby. prevent the rnortqaqor from sellinq the · . (.CIVI~ CODE, Art. 2130). · ·, .. ·.
· . property (DE LEON, 'supre at 50?r .
. Note: · ln a sale with assumption of mortgage, a
···The sale of the property does not affect the right 'stipulation providinq'forthe need of the consent of
of the registered mortgagee to foreclose the- on the rnortqaqeebefore alienationis void (DE LEON,
same even. if_ the . ownership _. has . been s~pfa at 5_DB). :. _ .
transferred to another (Id). : . . ·. · . · . - .
Reason: y\lhil_e it does not. out~ightly ·pro)libit the
5. -G~ant of-First Refusal . mortgagor from sel_ling hisrnortqaqedproperty, what
_Status·: Valid. it does ' not o~trightly . prohibit, it · nevertheless
. :, achieves. . . ·.
The conslderation for the Ican-mortqaqe Tl)~Y be' ...
saidto include the 'consideratioriIor th·e rfght _qf · R.igh_ts c;,_f _a _M~rtgagee: . . . · ;, ·

·i., . _
· first refusal. The mortga.gor has t_he .obliqation · T.o claim from/a third, person i'n possession ·of the
undera riqht of firstrefusal Provision to n<;:>tify tbe. -·· mortgaQe~ property the payment _of the. part q~_the
mortgagee of hislntention to. sell the property ·, . credit- secured: by the property which- said third
and qive.hirn priority o~~~;-other,~ty~_~s (Ii!.( .p~rs~~ pcisse~~es (CIVIL CODE, Ad: g?~!·_.·. _ :
Note: ·. A ". sale __ made ·in violation, :of'\lh:f .·· To.exercise' this_right, a demand to paymust have
. r.nort_ga~ee?s contractual ~igh~ of first r,e.tus<;} i1s b_een J'!l~q~ ,,from . t~e. -d~btor .. _and · the _latter
.. resc1ss1ble .. Th~. quyer. 1s presumed t0-..tia~e suQ_sequenu~'trefus.ed; or 1n- some ,cases when
be~n _r1otified_ tf:)erec:if,. ~Y th,e i-egist~auir?o"f the, de·mand i~. ahne~essiry to put · the mo_rtgagor in
. mortgcige de.e_~ ~ C(?ntainjng_ such· stipulatlQri, de_fault, thal)fie·mortgagew obtains the right to file an :
w~ic~ .. equat,es· to .nojice_ to_· -the ~ale•- ~orl,d. _ action to c011f ct the_ 9:bt "'or,fo_r_eclos_e !he. mo_~gage
__ ·(l.,toniua v. L&R Corporahon, G:R NP. 1_30722, (Mey ,Gov~mmentSer,,_celn.sura.~c~-,S~s_tem,
Decefr1b.er 9, 1_~99). GR No. _1_92r1t_ua~ _10: 20?(·> .. · . _ ..
l_n·surance_of, fn:,~·~~pe~y ,:· · '.. ·. . .. ~ ·
T:he inortga§AA---and J~e~ mortgagor. · both h9ve
. insurable interest in the property .. They mc;1y in.sure
"th·e same· (5 PARAS; supra a~·1134r - ·.- .

A stipulation stating ttiat·.on t~e occa~iq·n ·.ot'-'the -.. . '" -

· -·~o~~agor!s de!a,ult·; the _whole·. sum ·rell)ail)\119 . ~ffect of ~n_-lnvalid MQrtg·age· · .. , . : .
. unpaid au~Omi;ltlcally beC:on:i:es ?ue a~~ple .. _· !lie, princip_~! 'obligat!pn1 which .i~ g~ara_nfee$,. is not . ,·
· · · · ,, ,_.., ·rendered n.u.11 .and· void .. The p·rincipat··obliga_tion
7,-·. :~tipuiatfo_n o/0pset Pri~~ or _,;:i-,_PO';· '· . . .. . mature"s ·anci" becomes. demanda,ble ,in accordance
. Status: Void·. ·. . · . _.: : .. ~ith tne stipulqtion 'i:i~r(aini1_1.g·to .it. What}s-lost is the
. :, . . . · right.to fo(eclose the mortgage (PE;-U~ON,.$Upra a·t
:·:·An Upset Price orTIPO·is th~ minimum price.at. : · . 49'4). . . - · .. ,_· . .- ·. . : :! - .
which the property st)all be_ sold ell a pJ.iblig_ : . . - .
- .auction. . - - . . -Aliens·as. CrEidifor. Morigagee . . .. . .
.. of
.A -mo,rtgage may be c0nstiluted in,.favor alle'ns as · ..
. ·A.stipulation -in .c! m_ortgage .of .re~I .p_foperty .er.editor m_0rfga'gee. beca.use ·,t.does no( i~_~olve a·.
. pro~_iding for an 'up;,;"et p'rLc~ or Tip_o; to-~ecom~· . trc!,n.sfer, ofprop,e~y bi.!f. mer~ly·a lie_i'lo.~ the woperty ... __
operative. in .the eve,nt qf a fo(edqsyre ·sc1I~ at ·: · The p_ertirient,:.l~w whi9h·g9verns aliens -b~co(ning
· public a·uction,:.1s-nuii.'and Void-for ·prop'.ertymust mort'gqge~s. is R.A .. N_o. 48~2.Jld._ ~t 509). ·
be sold:to the highest bidder (DE LEON; supra . , · · · · ·
.• · at·537): · · · · · · The aiien ·'.'mortgagee:. may also Jorecldse_ the'.
mortgam{and·bid in the.auction sale. Howeve.r;if he
· · Parties cannot-;·. by agreement,· contr_avene the is adjudged'.the bwer,.he.-is mandated to dispose the
law·a.nd interftfre with the. lawful'pr,ocedui-'e.6f .the property : within_· ·fiye (5) y~_ars pursl!ant to
cour:ts (BPI v.. Yulo_, ·ct_R. .No.· 9358, ~epttimber . R.A. N-6. 488:;(
24, 1915) .. ··-. ·:
'-

;:,rn~ SA~ RFnA I AW r.FNT~AI i7F'r1 RAR OPFRATIONS I 683

 CR'ED.IT TRAN·SACTIQ,N·S
. , SAN B~OA LAW CENTRALIZED _BAR OPERATIONS,- MEMORY A°ID 2019 ·
1'D1(#tjffe}MIMMM'M¥ 2i2!8C&-SU:Ll1,6B§fat4.:t:*;a55:41pa,sw;e4:44$¥W*:*?*;*4f@AW*05ffl#tM±i¥40CMilii&iSIWff'!*'4i*Wt@r(

Foreclosure. , . . interVen_ir::ig period (DBP v. Guarin.a Agricuitural ·

It is the remedy available to the mortgagee by .which · ' and Really Development Corp, · G.R. No.
he 'subjects : the, .,IT)0rtgaged , property .. to the 160758, ·January 15, 201-4).'
. '.
satisfaction-of .the obligation to secure that for which
the mortgage
.· was . given
.
(Id at 509).. . 2. 2W:-Who may Exercise -: :· .
The right of foreclosure cannot be exercised. by
It· is ~ proceedlnq to terminate , the righ!s of, the any person other than· the creditor-mortqaqee or
rnortqaqor o,:i t~e pr<:_perty. (Id et 5,10). . .. - . his· assigns (Borromeo V: CA, G..R,. No. 169846,
fv!.arch.}B, 20Q8). · ·

'·

. J

. . 684 I 2019S'AN 8!::DA-LAW,CENTRAllZED.BAR.OPERATIONS·

 H 8 iitiAHBWM #8
. . .
it 5&14Pi 4 iW M lS:iM'&P
. .. .
'""' O'NS
c·R'.ffDJT TRAN,SA.CTI.
SM- fyfu

. . SAN BEDA
. . LAW f:ENTRALIZED
. BAR.OPERATIONS'" . MEMORY AI0-20·,9
•' ·- .
t;:·W¢§@R ~ :mz % %f~<941;e4,,z;;;: 13## ¢ ;s:;
% # #' ,i1N2#,iif ·• Jffe ,t:: S eifk42¢ ¥·x4?'&{.@tln._1 C ,. Oi4:**7l#i-iU!~'~#,,t, 111~
. . . •, ~ -.
: 2. · Extrajudicial i- when mortgagee is ·given' a Note: A foreclosure-sale: retroacts to the date of
· 'special power of attorney to 'sell the .rnortqaqed registration .ot.the mortgage. A person who takes a
prbperty by publicauctiori in the deed itself or in ·_mprtga·ge in , gop'd faith +and for . valuable
a document annexed thereto, under Act' No. consideration, the-record showing clear title-to the
3135.· · · -rnortqaqor, will be protected aqalnst equltable claims
.on the title ln favor of third persons, of which he had
.Note: This kind of. foreclosure. is conferred for no actua!': or : constructive -notice (St.·. Dominic
.· th.E:l'.morig,age·e;s pr~teption ((DE LEJJNisupra at · Corporation v. /AC,' G.R.'/'._Jo,. 70623, June 30, 1987) .
. · ,. 532Jc.:lt.-is not a necessaryconsequence ofnon- .
payment o.f,.mortgage indebtedness. T~e,power)
·.) . . " ', ' . .
Judicial· Foreclosure- under-the Rules of Court
to foreclose or· not is the preroqative of the, (Riife's··"of Court, R'u!e 68):.(JQSCE~S) · .: ' ·
, m9r:tgpge_~· ,(ifsiatrust -Qeyelopm_(lf!( Ban!< · v. Step 1: Jµdfc,al Actlon brought to the proper court.
1
, Tuble, G.R. !"o. '18397; July 25, 2012). . having jurisdiction 'over the· mortgaged property (DE
LEON, supraat'512J: .._.) . . · ' · . r: .
·,·::Ju.~icja_l ~?ref!~!'l_uie:v.,E~t~k)udi~ia_l .•t'. -· ,, •
·· · Foreclosure- · .. ·

.- .· . . ~ . . . .
• ' • .( • •· •• • ~.. ,•. '.: .. •; • • ,,,· • • • 't ·: • • :r \
Ste ~:, . .§ale.to .the bighest _b).cfqer at-public auction
if the .m'ortgag9rJails .. to pay. at 'the time. directed in
the co,urt or~ef: There -~E). publication and ·m_u~t
posting of r:fo,Hces.' before ·the 'auction proper; any .
. person ,~a/~d,in~Jud_ingJ~e·deb~or, m9rtg~gqr/1an,d
·. ~.ortga?.7: ~~~~s~F _o.qu~--T,· ': 68,. ~e-~. 3): ,.
Note: -l]ie· off.er ,!~id rriustbe the total debt -of the.
mortgagor or tlie market·. value. of the mortgaged
. property .'fhicbev.e0 lowe'r.Jt th:e 'mortgagee is.the
. highest bidder, he need .notpay the purchase price-
·as~t~e. arr:o~nt?f'his c~edit ~?Llld·,be G._Of)Si_d:e.red as
the l:)cor:is1dera.t1on ··which ,, will -:·be. stated .. in :,the
~[Jj~l~l~i~li~[~~~~~~- certificaterotsale (QE{Lff!"f!:,supra at·5~8) ... ·

. · The.re,.~ is.:_ eq:uity· -• ~f ;There ·. is '. ..a-. rigbtr; of : ·'st~p· 4:· _g_offi~rtl-atiori.,q<sa)'e, ·wbic~ :ope·rates tq·
.. ., -'rede'mption, ;:exceipt· on' redemption:':··-,· :: :., r· · · divesf.the rights of a11 ·part1esJp'.th:e-c;3ct10n ·gnd:yest
: b'(:i'nks which' pr.oviaes fc:>r ' ... ·. :··,,. '.. . . \ ~- 1i_tieir fights ·to- the. putc_hqse'r' st..ibject-19 ·sych right of
. a ·right, of redemp_tion-. . . ,.... ·r' ,, " ·< · rede.r.nptiorr:as·.may· be··allovled' by._ law (RULES OF
.within. cine Yec!r cl'fter the · COUR.T, Rule 68'. _,Jef 3r · ·. . .. , .,..
s.al}i'of.t~~- property)t :.- · · ·, · · · · · _., · · • · ,.
~~::r:~~~~-~~~~~~~~~';ffl~
1~
· -Requ.iremertts:' · .·. · ·., · ·, -: ·.- . • ·
,· . 1-. · Motiori' for confirmation is;filed;. and
· ... · 2. ·. Notice ·and
.- .I
Hearing of motion· · I . • • ~.
') . : ·' .:.... -:{. . . • ·.,r· ·. . ~ -. . . .· ..
· ,. ·"Note: Effect, o{ c.onlirmation. pf sale .retro·atts·-tb the
.... dc)te · of _the-;reg isfration of-t):i°e mortQag~ :(DE:u~9N,
, . · S!,lf)raattf42): ·_: ·. ·. : : _._. ... ", : · - ~-·. ·. :
j;.

Note:· . · Be.foJe · ~he . confirmation- of- a judlcial

..·fored0sure-: sale, the court ·retains GOntrol of the
. procee.dings· by -~e,<..erciSiQg. a s_oun•cJ _diSCJetio'n . in ..
. regard . to it,.: either' . grantin'g .. or . wit):lholding .
·. · coi:ifirmation_ (Sa/az~r v. · De· Torres, GR.· No. L-
.. 1371.1;- May 25,_ 19(30).· ·. .
(DE LEON, supra a_t 512-527).

·. ;"
/

.'.:'nlO C:111\1 OCl"\11 l 01\IM rCI\ITD/11 17CI"\ 0110 nni::o·IITlr'II\IC' I ~A~

 C:REDl:T TRANSACTIONS
. SAN BEDA
. LAW
. . .
CENTRALIZED BAR
. OPERATIONS-: . MEMORY
. AID. 2019
"!.. m,uwan.-,>¥&¥J·ffiPM&StMMJW·~®%iii%ipf
tt4ttWtZUJM~~M#k,)iNJ&j4&949#55&&H¥b\f :3tt Ma,• st?4!12H®t!JW¢&Uffi#tH&#IW:£.'1
· ·Step's: gxecution of .Iudqrnent iri .the manner Notices 9re · given to secure bidders and to
. prescribed by the law on mortgages, ,the parties not · prevent a. sacrifice of the. property (Sps. ·suico v.
being · authorized to chanqe · _ the. procedure Ptiilippine National· Bank, G.R. 1702-15, August
. prescribed (Piano v. Ceyenonq, G.R. No. L-1.86Q3, 28, 2007). ·
February28, 19$3). . .
Contents of notice: ·
Note, · The. proper remedy to ,seek· reversal of a To be valid, the notice. of a sheriffs sale, must
judgment in an action for foreclosure is an appeal contain the correct-number of the certificate of . .
fromthe judgment itself'or from the prefer confirming 'tit_ie and th~ correct technical description of the
the.s_ale of foreclosed "real esta.~e_.(Sps. AgbacJJ1 -.v.. · real property sold (DE LEON, supra at 517). ·.
lnier-Urben Developers, . lnc., ~.G.R.;~_No. 14402.9, M •• ..

September .1.9, 2002). · · - . ' 2. .Pubijc~tion tit prop_erty is worth more than
'Step 6_: ~pplication of the Proceeds of.th_·e. Sale · ·p4oo} -. .
Once a week for at least 3 consecutive weeks in
· 1. _Costs of sale; . .: . .·a newspaper of qeneralcirculation in th·e city or .
2.. Amount due. the mortqaqee: · _. ' municipality. · ·
·3 .. Claims __ of· junior ..encurnbrancers ... or.' persons · . .. .. . ·
tipl?i.ng_ s~.b~equent rr:iortg~Qes-.fri the .ci~cler of · The=-':notfce of. sale shall be ··pubiished_ in a
their priority; and
4 Th . b I 'f ·
1.· u h
.
II
b
. -
id . .

'. ~e~~~~i;~(e~ ~odji%~~~6~d:~;i;;~~. . V rtx; lo secnon

· -. ·. -~. · a ance •.
th
a~y •. S a_.·· -~ , pal_-_;?!' e

1
..
i·
J
. -
_
- ~- · f, · t. · · ..' h' ·t
newspaper .o. genera 1. circu 1 a jon m t e c1 y or
x?oyince_ . where the. rnortqaqed property . is.

1, P D .1079 • . . .·
Ai,~atJ~:
~y-
Step. 7: E.!(ecujion of s~enff's e {.AJl('~ment. of p~~llcat,on. of a Notice. of .:
absence ~.fa Certifi~ate of Sal,ejrib tit1~1~ssecl~~-?le !1l[~~-.efaJud1.c1al.fore~losure 1~ co~phed ·
the foreclosure proceedings toillie"vendee (Id. '}ib r.., "¥i witl'r•~-ve!i_1.f.t~~-~wspaper "".'as ~ot printed ~n the
5i4). ·. · , . · · · ~- .. l.l ~ l1Y:,.. locat19f') wtte.r~ . the property · 1~ _ locateg. T~e
: . - -.. .. · . · · ..... : . · 1\/\ . cruc1~1.facto(}~n~t· ,,wh_ere the newspaper_, 1.s
Ex,trajui:!icia!. For:~_<:!~~ure . -~· . · ·' .. ' · . · ........,· [jl · . t e:1r:i_ed }ut_ y.,h~th1~ -the newspaper· 1~ bem_g .
Power t_o sell is .$.i"Pn.ted to t~m ·11gag f '~~~ ~z.~irc~ated !n ~e) Cl!Y w_~ern the prop~rty· IS
r~~<}W,! ·(Gotesco:1Prorert1es, In~. v. S~,!1c!b~nk .
The· . f!10rlg9gee . must ·tiavl~. the ,··A9ll'!e! lto !jj •
ext'raj~dicially ·foreclose· ttie~ortg·_ageK~~&ssly· ,::J-c., · C::om!f:--~_R_. t:,Jo.: 1
209)1-52:. July 26, _2017). - · .. -' _
gra_?t.e!d in t~e 'mo~g.age · cq__nt~c..t
i~~x_.·0!he~~

x- Hi\._ ~. !J...,~ . , -.- ~l

·do_qum~nt,orm-a speCl{ll pf>Y,.,er of a,tlorn·Jft.~R;4;) or~ .:c"G<f,i? ~rt -~d;r Se_ct10~ 5 of R,.A. 720 (R_ura~-Bar:iks ·
a!Jthority-(AC.T Noi 3139, Seq,~:·_·.

·N~t~)! {h;r~··:i~.· n~,:~:~tl1~ri_t~: gi~_;~·

~t:.fi. · 1.~-,,i .,£;,'. ~k-~as ~end_e<itpy·R·.A. 7_939;.the pos.~m_g of a
~~:t8e-~- _~-~:~_:~•l\!~~s~~~.
!
ort · ~gJ~_,1~\~J0 ;;' [~~\;·~~ "~d~
.. : 0,
• • , •• • ..... ,

the proper reme.dy 1s.Jud1c1~I fof!=!~os.ure:·7-' .~c:qrf,p.~~~upubhc. pJflces ·-~ot ,qnly: in· t_h~
· . · . . · . · ,' . -19.{).- . l'\1.UneFJ~Y but·als.Q 1n t~e barrio wti~.r~J.h.~ lar:id .
P~oce~u~_e Jor; E~traj_µ~icial. Fpr.e~lo~ '_re of:..:if{>!!t
Re~l.0Est.~t.e Mor:tgage Und_~r .ActiNo·._,.3:3s~ri'fed1.a~ely
M. i\_1,n;1!rtga:ge·djs si}uate?· during. the ~Q7daY,·p.eri~d
_precechng, the pubhp: au_ct10[11 .. _1~ ·
Chattel .. Mortgage,. Under Act -N,o. -1~08·, (AM.· No. . .. ··-MANDATORY (Gufinco v. Antolo; _GR,· No.·
9~;1 o::05!-Q!· January 15, ·2000, 'fufther:·amen,d,ed _on . . {5085_2, July _31, 2006) .. ' '
August7,·.2001): .' .: ·.. · i. :-.- . ·. . ·· '_ _ . . .
. Step , 1: '. Fili.rig. of_'an appljcafion · befdre·. the , Step_ 3: ',The appli¢ation _shall be r~ffled· airiotig
- Executive'·~udge th.r:otJgh. the C!er~.ofCourt'.'{AM _di!f~r~n\}r~riffsc Tl:lE::Jo~-~~l~s.ure.· may·-~!~?' b,e
No:; 99-10-~5~'{); P.ar: ·2).' ·. · .. ·;~· · .·: :.- - . :.. .'·' , ~ ·· . _.. ~O._Q_dy~t~~f:.!>.Y· a. Nota:ry Pµ~}1c ._(~_.M. No::~[)-1 o-p5.~-
"::. · . . .o, No .. 4).. · ·. ·. . · ·
Note: In ·extrc;1jcidicial· foniclosure,of real. llio.rtgages . - '·- ,,- ·. · , .'. · · - · ·
a
in.'.dlHei-ent-loc9_tions coyer,ing· single·in.debtednEiss,:. · __ §,t~P- .4:· An .au~ti~-~,-~c:ile n;iay ·.be.: hii'd ~.even. w_i't~·
.only ·one-filjn·g J~e,corresp'on"ding - tc:f-s(,lcti-det;>ts)1all,· just 6ne.:{'1} .. pafiicipating bidder: The.: name/s ·of,
be collected (A.M. Nq. 99-1.0-0.5-0; Par:A)." ,;_, the bid~er/s· shall.he reported 'by .the Sherif(orthe
· '· _ _ , · ·.- · · · . ·. ., .-. No"ta'.ty-Pufilic: wtic/condu.cted,-the.,s'.c\le ..to tBe·~61e·rk
St~p ,2, Glerk of CQUrt '«ill ~~ami_ne;wtie_ther t_he.:. of-Co(.irfbefcire the issuance bf the certificate 6(sale:
fol!e>wiiig,:req\J_irerpenfs·.of 'the ·law': have- . been · (As.'ainended qy the January 30, 2001 Res9Jution,.. ·
·..- t'ompi,ie,d y:iith:. (AM No. 99~10~05°0,.No .. 2, f:ar. c).. pata~rf1ph~9 bfA· M: No: .99-.10-'05-0;·Sp\ Ce,rfe?,a
1: ,: Postjhg;~f notice · · · v. Phil. S~vihgs,Bank, G. R. No.- 190078, 'fv1arch·5,
Not less than 20· days fn at least three (3}:public · . 2010).
· places ..~ of ·ti,e · municipcility . or·. city . w.h.ere the ·· · ·
. prop~rty is 'situated.

686. I _2019 SAN.SEDA LAW C!~NTRALiZED BAR OPERATIONS

 ·CR·E.DI-T: TRAN·~sA.CTrO:N-S . .
. . • . . - . SAN BEDA_ LAW CENTRAilZED BAR OPERATIONS --Ml:MORY AID 2019 . • •
· k¥M&SBMMSf¥M&$SiSS¥MiffeW&if
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. The· two-bidder rule is not applicable 'durinq - the Note: The recko·ning d?fe_in .cas'es of rEi°gistered lan·d
public .. auction of the· mortgaged assets· foreclosed is from the registration.of the certificate of saie since
_. pursuant.to Act No. 3135 (Bo~fo(I Equity Resources, . . it is ·only from the date that the sale takes effect.as ;3
. Inc .. v-.:._Qe!· Rosario; .G.R: No. 193228, Nov. 2Z, . conveyance ( Gorospe. v. Santos, G:R. L:~30079, . No.
201'7).·· . ' . . January 30, 19_76).: . : · ·

, Reason.-The two-bidder rule is provided under P.D. · T~e · commencement of .th.e one~ye_ar recleinption .... : .
·_No. 1594 tocontracts'for government infrastructures peridd is. of critical .importance, not O"rily to, the .
. J?r6je~ts ·: becauseiof public. interesf .· involved. jwdgment debtor or a-redern_ptiorier,- buLev~ri"_in.ore
. · Alth-oUgh,ther,Ei; is-a public interest in the regularity of so· tci·the successful -pi.irchaserin 'the "execution sale.
.extrejudiclal.foreclosure of. mortgages, the . private This)s because·, -under th~rules;-itls:ot1ly a·ffer-th~ .
interest is ·pr,edor!rinant, (Bos_to_n Equity Resources la_pSE? of S.L!Ch . one~year · period- :with, ·ho . valid.. ·
inc: v:,' Def· Rbs~rio,· G.R. 193228, Nov.' 27, :ryo; ·- . redemption_havihg bet4h effectecl;.that'c:3 Sllc<::essft.W
. 2011;: . . purchaser ~cquires, abs.olute ownerstirp.qver, the real.
property hei"p(J~chase,d_,in..the ~xecution;. sale an_d .
.The s·ale- should ·be. hild in the·.municip~l- or city hall a
becomes e·ntitled to. ·final· ·deed oF sale. The
of.'.t.he . muructpallty: or- city where the. land lies. commenc~merit of.
the 6rie~year \eden1ption· period
· between 9:0Qin therrrorriinq to 4,00 in the-afternooh.: . is rec.koned from '"the date. of..r.e·gistFatibn .of tfie
. ·. No-sale-can.beleqallyrnade outside the province in cefiit'icate of · sale:" The .. phrase . "regisfra.tion : of .
. which .the .. property jold .ls situated. (Act- No. 3135, certificate of sale"· 'hiean's:- registration ··of ··such
·. Sec, 2) .. · . . ~certificate.with th~ RP-.($.o,ryeco Met~l:Corp... v: Court".
of Appeals, G.R. No.- ~O?p31; August 17, 20_16): ·.'
. i~e ·i~·di~~~;oility. of.~ . ·;·~~I . e.st~-;e_. Jl~ortg.Age '--isf
. violated by. conducting; -two separate .. foreclosur?..
,.
.. '
: . .· . ; _'.'
.
. - .. .
(.

~ ·.~~ .. _;,--·
I. case th<i mortgagor. i~· a Juridical person ~~q. the
•,

\ • •. • ;).t
• • .. -·.. ,. •• J--. let'

proceedtnqsiori ·rn9rtgaged properties lpc~d (h , . -"a§e~~s i·a-nk orfinaiicialinstitutior,, the right_ to

. provinces ~E; long asc each 'parcel -ef~lc:!n_d_ -rs , .
0
redeein t~~roperty A Uf\til.: but nof after,. the
· answetable.forthe 'entire debt (Sps. Y,tfy!Ffi,tiilippine~'. · registrc3ti?n t,\ertifi~.ate~_of s.~le-whicli iri ~no: qase
cq.J:Ti,fi!,er~falJnte_rn?J_tiona!. Bar,k,_ · G: R.
~arc~:-17,:·20~6).. . ·::·· ..... '. ·'
: Any .. person. may subrnit-hls-bi . .:li;i a p:ObJic,bidclin~
- . . . - .. , -~ - ;ri ". "'
~!l14.79qj,.
t,.~:: · ,
sh_al) betmori.

' . \"-
t~a!1· three:. months. aJter foreclp~yre,_-:
· whichever. is.ear!i~r:(R.A. .8791;- Sec:-47); '.. · ... · . · ·
. ; . ' .:. . . .·.
. St~~-~tt~/thE? -re~.:'n,p~i·o~,;~.eri~d;lia~ expired1
' ..

-
·· thatls exposed to__ general or,~ulSHc;i:vie ' )~y~ne~t the Cler~;9,f.P-01J,, 1s . al_l,.arch1V.: ·t_he re~<;>rds (A.M_.
of the purchase pnc~ must b.~ 1~s!Ji:ieeft 1htli~. . . Nq._ 99.~ 1QtQ5_;:Jif;No.
2, letter d).:;:'·' · :- \:: ·· '. ::.. · .
.. purcha~e_r Js- the m~_rtgagee (DEvf;l.N, SUf!r~· pt ·· Note:''The ll:lw, c6v~rs·bnly-teal"esta~e mdrtgages ... It.·

·1r. ., .
524)., . .> •. ·• , \']}
·· ·. ·- tended· merel.Y ta·:r~gulate)he: exti:ajudidai sale
~!'lbRro.pe_rty:· . rnoJtga~~d., if: ,·.:and.~ wher.i~ th~
. ~u.i~ on Defi_~i~ncy , _-:·. -, <'' , . .rn _gage'e°"?i_s· given q. special ·power or:,.express. _
~ , .Theplafn r.esu'lt of adopting extrajudieia.foreclos.ure a·u'thority to do so _in.the ·deed itself or in)i.doi::ufnerit..
UIJ_der·A~t N9. 3135:is that the 9ceditor,~js his·· · -. anhe~ed th.~r~to-(Lun.a v:· Ef?c~rna~ion., GR NQ. L.-
, ·. ..: ··.· right ·'.1.~.: re,coven ;,my ·deficiency· (Heirs pf Sps, · _46:3_7, .· June· 130,. :{~52; ,ponce· .-,de._.·'Leon .v;·
·.. . : -FJaviano ·v. McmilaBanking:·corpo~atibn;. G.R .. N_o. :.. • Rehabilitation. Finance Corp., G.R.·•)'/o.-·L~24571, ·.
·.. 1i1206;:·septemb.er23, 2013), .· . ' . ·. . De_cembe._r:18; 1970);_ >: :·,. · , ·~. ·. . ·,
.. ·. .; ., . .
. . Step. 5:·.The :c1e~k
of'._Cot.irf or N.6ta;.f Pµplic·· Sl'\ail . ' the authority to ~eli is ~at•
ei<tingi:ifshed_qythe dea~h··': .
· : :1ssl!e a .certificate s~le indfr!atfng·,the .amount ·· ot ofthe rQQrtg~g1r {or mortg,::ig~eJ as i_t-,i~_:a:t, :,e.~s-~riti~I ·
.. of indebtedness, the:. filihg-· fees collected, ,he and ini;E:1parable part of }r.Qilater.ata.9reer;nen( (Perez·
v. PNB,. GR No. 'L-2181"3; Jµiy 3p; 1966): .... ·· ' ..
'mortgages . sought'-: t<:> . be:' }9.rectos·e,cf,'- . the
description -~ of .. the:' ··real .. estatel;i .. and . their
. . . . . . : . . . . . . ~ ... · . ·., . ~.: :-,
,' :
· .\ . · reSpe~Cfi,V¢_;1qc~tion$ {A.M_.·.N.o._ ·99-=10~05-0, · NO. ~,-. Cohslructi~n .rif-Ac_t °N,o:·3135 '. . . : ·. . . . .
1eiterdf · · · · · · ' The, constrl.ic;;tiori of.this Jaw must be. ·equ;:illy · and
--.:~:. ·.-·. ~ ·:,,~:_:,. ·. ;._ .· . . ·. . . ·. -. ·. . . .. . .
' .. : . .. :
·mutui3lly . beneficial_. ·to"' .. both · pai:ti~s. (Philippine
St~p~Ji: The_certifi_cate of:sale must be approved.i Natioria_l Biink vF$ps,:cabatingan; B: R.. No:, 16.70§.B,
·. · by-tt)e'·Execu_tive Judge· (A.M;'Nd: 99.:10-0,5~0,.No .. _. JiJly:9, 2008):, - . .. .
· 2;'Je_tter pJ .. · · ·,· , --·
Re;;,edy <;>f D,ebto? Aggri~~e,{ bi
F~~eclo~ure, .
·. Step 7: _Red~mption.of ·property sold. -The.::debto'r under Act. No,-3135: ". :. . . . . . . . ..
has ·th~. right to red.eern· th.e property so_ld within the . ·. 1. .File a. peti!ior, ·thc!Ul:le sale_ be -~et asfd.e. ~nd th_at
term·9f one year fro·m and after the date o(sale".(Act the wri"tof poss:ession··b~ cancelled, specifyihg. ·
No. 3135, Sec. 6). · •· ., · · · the damage to ·.him .. ' . .
. . . "'-·.
 . .

.C.REDIT TRAN·SA.CTION'S
SAN BEDA lAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
m'UH4! Wi&ati ?fAS!WifSt SSWiml#Sftrl"#fl,ii!it,A#F#i• WI tt siM,:m-wrWY'M,tti&tfRM& ,:;e: d+D¥it#:!1&i' i M-& tb W4'

Causes: . Republication
. a .. The mortgage was not violated;·and Another p1,1blication is required in case ihe
b .. The sale was nonnade in' accordance with auction sale is reschedulecl, and' the ab~ence of
the provisions thereof (Act No. 3135, Sec. . .such republjcation in.validates the foreclosure .
BJ: . . sale. t~-e parties have no right" to waive the
· publication requirement. (DE Ll;ON, supra .. at
2. Ask annuJrnent of. foreclosure on the following 527). .
.·grounds:. ·
-a: Fraud; collusion, accident, mutual mistake; 2. - No Requirement of P~ersonal Notice .
. breach of -trust or · misconduct by the . Sec:. 3 of Act.f'!.o. ,3135 does
flO~·require_pers011ai ..
·purehaser; . or .. any pa·rticuJar rioticE; on the. mortgagor mµch .
-b. -The· sale: has not been fairly and regularly less cin his successors-in,:interest where there is .
.. conducted; or. ·. . no .contractual $tipl!lation ·theref~r (id. ?t 518). · ·
·-... c. The .Rrice · was inadequate and the
. -iriadeq.uacy was so great as -to _shock the . Unless the parties stipulate, personal nciti~e to
. conscience .of the court (United "Coconut' -the. ~:mor..tgago'r -in. extrajudicial .foreclosure
· -Pranter's. Beak: v. - Sps. Beluso, G:R 'No. · proceedinqs is 'nof nec·ess-ily'be·cahse Sectloh
· 159912,: August 1_ 7; 2007). . . '3·ofAc}..Nc(3135 __only'r.eql:ifres tti·~ posting ·ciihe
... . . . ' '. .notice 'of- .. sale. in. three ·public. places, and the-
Notes ..'on Posting .andPubllcatlon Un~ct~o. u· .~~pCJbli.cati.o~ .of -t~at notice')~ a.
ne.:Vspap.er.:.·.of
· _31.35: · ~ · . · .. · - · ·
1: Nature, . · · . ·
•
· " · .:~·
. · ;";........_
_ ,(7°'
J.. ~
rx... . : . V
'.J. g~'her;.1.. c::.irculat~o.r:i (Remirez . v. The: Manila
e._an/vng.. rJerp, q.R. No. 198800, _l?ec;ember 1-1;
They we ~ 1mbueq with ~i,>j:1blif~PO,.l1cy · .. 2C:11'3r .2\, .,.... ·. -, :.' · · · · \ · -: r . '. ·
-~·, consideratlons ·. Notices are. giv~gJ)o. ·secure~'x,'"'C.,_., . : . , . .! ·. .. . ·,' ,•.• v .:..
bidders. and prevent a ·sac(~e".o~tne '"r.bpe.~ '1(. '\'f' .Hmj,ever, '(t~ere the f·cwreem~nt.. required
· (Caub,anrr v, ·-Crisolog~·,, G,tR!u«, 17458tt, : ~- .!.&..: p,er.~pgaNqt1c~ t0 th~ m?rtga'gor i;.md .: nosuch
F~~rua.ry·,;; 2015). . . ', · : .- ,/'}~ .. notice·yvafg~1iJ,t~e failureof t_he rilortga~ee·to
·· · . . .
.Failure
· . - . Z. · . J . . cornP.IY w1th)~e~.otractual.aqreernent-with the
.to. ·comp_ly 1witl'l1 ·the .staiutoJ~,? : .,.....,,r: mo"rt~agq_r, i. ., to\se.nd n·ouc;e, js a . brep.ch

'·
· req~ir:e~er:,!s_ 31s to.-~pl!lblicalipn 6( Jotice £.o~.n;~

: · -.w~1ch: mvahc:J~tes _t1;1e,salfyLa6l<~of,rep~'?,!1cat10!'1;m

_,of notice of foreclosure-~a1efn:lae sub~.J1,~e~t1s,~ .; ~
('

after .th~, Qciginal ·date re~d~rs. such .s~~~~~ _I . ~~iJtiei'~fd~s-,en(

5(,J:f . , _
~z· · ·
!?.L,JJfi~ii:li:it to ~r'.\y;:iJi~c:lte ",(oreclosu.re~sc;1le. (Lim _v... _·
.. ' a~~_tio~· 's33l_~-·~pASt!tut~( aJu~i~dic~~l\9!_!?ct·;~..::_··::, ..... Oe!r-"rtif. Ba1k1·.G:R.''No. '1770_50, ;Jul>: ..\.'
·: 2J)}13J:i - ·

2 i"".: - · ..,,,. • ,
.··_··"\ii · ~ - . · . - . "· . : . '. .. -~, .
·9e·c,.:-3 ·r~9uire the J?OStinR ofi;cJ .
-·

·:~(se·carity,?a'!~ eojp. \i. _Sps. Rodrigo; Gdf.~~oGc_e'Q . S!3l_e oJ 'the mortgag~d ._proper:ty JO.E ... · .
. . ~- 1~2~3~, ~~n~-~7,•20t8t· ' ~,:-~2:~~pra
art~.9)._· .:. ,. . ·· -.-.. , _ . · ··~ ._: .. _
·,:: Tli·e faihji'e to_p_ost;a notjce:i_s bot·per/~~d,,,_. ri<3. · N<>"'~~~c(.;·o~P.qstii'l!;J.i;S Re'q';J,ired: . · : . .
~dr _jnval(~"c3Ung: a .fore~l0sure ·sale~_0\/id~~:Jhrf. 'M
Al~~e~rr~,
.tl:ie notice ·there.of· 1s··.'.duly· pubhshep~eqtl-lred,·0m.uch-'less cons1qered-md1spens9qJe·
. ·r:~le: ·. A :ce~if)ca!e '?f. Pfis~ing·_ is ·~_or

. '6~wsp<:1p.~r"6Vgen·er91- drcLilation (Dev'elpph:,e,:,t. · · for .tlieyalidity. of a. f9reclosure·:sale under· Ac~

· Bank· of the. Philippines ·v.: .A'g'uiife, GJ?:. No~. - No. 3135: (Id. ,supra a( 520). ·. ::· .. ,., •. . · '·:.
· ,121.4877,·S,eptember.7, 2001). _· · ·- · ·· . · ·· ·,'..-. · ., . ·· .
,.- : , ,,. . :E~c~ptibn: ,Such~ i::e_rtific~te is .."signffiear'lt orily' -
. : ... · Reas~~:-:By such-pµblicatiotl,.a reasonably:wlde .. ·· ,....;~. when :''t·it .. : b.ec·omes: I. necessary.' ,.to ,.-;-:· pro~e ... · ...
. - J>·pub'l(cify · ha,q,. beef:i':.~ffeded: such Jhai'_1,fhos.~ . . · .,·. ·c"i:,mp!iance witti.,th_e. require'd. ciot,ce~_of ··r0sting·_ .
. · intei-e's'fed 'might ptlendit~e .. publjc. sale, and ,ttie -: · · (Ibid.).· . ·. . • ·· - .., ··. -, . ·
parpo~e 'of the i"aw had b~en thereby :;;u~served. : . . . . .. . -· . - . . . .. . . . . .. ' : . ;
- (Devf]lopmerit Ba.nk pi the_.:Philippines·v.:Aguirre, '1 ri Bohanan' v. _CA:, (G. R. }J;·.- 1 j 1654,.
}..p;ii. '1 s, .-
l;
. C}R7No. :{4.487-7; September 2001) :· :. , _' . 1'996),. the ·absenc~. of-tt.,e 'affidavit ·of publlcatiqn
was. considered fatal .because 'no ·equaHy
. ; '-./S,s ·l~n{J'.as· ttje·:qbje~ts,9f'.the:11oti~~·a.~e,attaii:i·ed, ' c.or1yincing .and GOmj:Yeterit: prbo"f-:of."eomj)liaht!:? .· ..
.- the sufficiency ·or yalidlty_of,a r)Otice of sale is. n9t . '·was·. :.offer~d t'q compensate '-.(or.:. ifs· ·nq_l)~
.. affectedqy im.material·err9rs br simple mistakes · presei:,tation. . · ,- · -
cir cimi~siohs not-calcul.a'ted' to~deter>pr".mislead
bjdd'ers, ·to .. depreciate the v~l.ue:~f-th~:-prop.eCTY,. 4. Bu~den o.f. Pr6ving ... r,Jqn~.¢0.mpliarice with
or·'to·i'prev.e(it :from. bringing· 'a· fair. price \Sps. . Publi~;ition·an~·Postin_g R,e.quir.e~~nfs·. .
Certez~ . v.. P._hilippjne Savirigs·•ffank; G:R., No. . Forecl9s~re 'procee'aings ·haye in ttietrfavor·the
J9007i;J, Marc~. s;.20.10):· · ·: ·.· presumption ,of. regu_lari_ty (Union· Bank··or the·

. .
688 I 2019 $AN BEDA LA\JV,'CEN.TRJ.I.LIZED BAR OPERATIONS .,· ..
 id!tijS MWii,iif 3 M R±ili-S-t 33&ff

CREDlT..TRANSACTIO·NS
. . , .. SAN,BEOAJ.wcENTRAUZEOBAR OPERATIOt:JS·- MEMORYA/()·2019' '
@81±3-i#&a-Miffit§ -A:fi!iFJ# 1 &iwrfil.R¥iFH*fSiftfflt~#iAAW'ift4¥11®'#1! t4i ·B PiR'i&,¥¢ lti')@.#Pi"f!@:z;;EJ, 84BiM#5 i\: s: ·bwesor.· :i

Philippiri~s v.. CA; G:R. No: 1649.10, Sep(ember_ A deficiency . clalm. is allowed (Pnilippln«
.. 30, 2005) ... Netionel-Ben« v. CA, G.R. No. 121597, June 29,
_ 20Q1). .: . .
·, In . the, apsence : of · contri:fry evi_dence, - the
presainpt1on· prev_ails that th~ sheriff· perform~d · . . , Note: . In both · judicial and extrajudicial
:·. ?.:J-iis offici?kd~ty of posting. th~. no.tic.es of,sale in . . ·_.foreclosure,:- . when. a- third· persorr, is the
·,. :. thl;l r.eglementary pElriod ·(DE LEON, ,supra .. at · · mortgagor, he itnot liable for any deficiency in
·. 520): . . . the absence of a contrary stipulation (DE LEON,·
· .·.: ··supraat-530). ';.': ··- ·
Pretermission.of M(jliday . . .. ·_ . _ ···~·- . · · , . '- ·; . , · -, · .-. ... ~\,
Whe're the· ·qay,i.or _the( last' day,. for. doirrq-any, act · Actio n for Recoy'.ery:of•Deficiency- ·.
0

required or permitted by law: falls 'on ·holida'y; the a . A. mortqaqee may recover- any 'deflciency in the.
. ad may be done. 011 the next succeeding business' m6rtgi:ige . account, which is. not realtzed- in ·a
-. day. Preterrnission applies-only when thEf last day'of ·. . foreclosure 'sate. An independent civil action for the .
. · a'.giv.~n p_erio:d;Jor-d9ii:Jg:' an- act falls•;()~ a holiday .' ., recovery of,defi~iencyjna'y·be filed .even.durinq the ..
'(R_EV .. AQM:·COD~,.Se'c._31). -·~- · · period; of: redemption (!Ta.mate· v. CA, GR. No ..
·· · · ·.,· · 190635,. Febrtiar.r_,13, 1~95). · · · ·
9i
The-:pretermission : .holiday _is. n·~t applicable-to ···
auction sales.It ooes.notappty to a '9ai,fixe·9 byan . . . Once the auction -,$·a1,e i§- ~ffecteci"°~nd ... the ·r~~ulling' ·
office.or officer of the government 'foran -actto.be, . . deficiency is .ascertalhed,' the' rnortqaqee-creditor ls
done (Vatrn.o_n~~ v, CA,-G.R: No.,L-4'1621, Fe'bruaf;Y. en\ftled.to'.secure·a?defiGie'ncyjudgn:ierit which rnay'
1_8, 1999), .':' , . · immediately" be. executed; whether- -or .not the '
... ,: ,.'·> -,
·· · • . . .. · · · , ,., "'
moctgagor- is ~!Hiientitler;:l:ta redeem th·e property: sold
Effect'.of 1riideqLiaoy :of- P.rice _..in."~ Fore~losure .. (Dev_el~p~eif3ant.of{h~ Philipp~nes_· v. .-,Vda. De·_·· ,
Sale'.. .· .': · ·.·.,.· . - ,; oil, G,R. No. ~-25802! January.31, 197-2).
.-., .. _•.. ,... i . .
. ~en~ral,Rui~::-:Wheri ther~~,is.·a rigpt,'to_ii~deerii; .-.
.; .. - .. _ ... :, · · ,· .. ; ·· .. : · - . . .. · . ·
· · · inadequacy df price is' ·immateriai .. 15ecal,ise ... theL ·; Deficien'cy !Judgment - If the deficiericy' is·
· ju~r;:lgmen_t debtor max re.acquire the.'proP.,ef.ty eas~['° ·: '· enibodie9.in ~ jtdgment _([)E LE<!)t;J,. supra c!t 930).
at ·a'low.price or·sell;his~righrto red"eem"t(Metrobarik · ,.. ,,. · !-J · · · · ,. ' · · ~. ., · · · -·
. '·-V. _ch_··_v~- .'::u_-Ta_.n,_~. G.iR_·:·'.NP__ ; ·.2_0_·__2.1,z~.)-, -~-·
;q,.. (£;, , .
."
g (!st: f 1:'.
__ 1_·_1, 6)~
: N'ot~X:ThJ;2t1~n piescri~~.s att)°/ten {19)'.yea~~--from . . .
· the- timJ(,the ~ight of ·action accru~'s _'(CIVIL::· OOQE, ·.
B<"~~pti~n:/'{Vh~n \hf ~rl~e ,; .so. in·~~u~te .·as t6 \ · Arf. 11'4'1, par. 2); . . · ·. . · ··, · ·
shock .. Jhe, c_o_psciElrice :-of ,th{ co~~tak[jig .!nto .. ,~, ...
. ·co.!1,s.ioei'atiq~ th_e. p~cµlia( cire:un1sta~es--::--attElnda9 _: Redemption . . . . <
th,ereto, _ ({!nit~d ,· Coconu.t... .Pt9n~er~B__f[lk:,v · Sps. · · it. it·
.the .. ,.tr.ar:isac_ti~'n- ·.by'. Whi~h\ fhe: . m:ortgago~ ·
: 8elt1so, G:.R·No. 159912, August .17, -2fJOZ1). :. . reacquires c;:>r buys bacls -the prope_rty.'w~ic_h· mi3y·

: . ·Not~: ,f~e:· va1Ge(¢t.Jhe,mortgamid·· :p;opi~rt)a ....... -.-. . ~ii:.~~?;t,tt(i~~~~~~h~~=~~~~ci~~/~t~~h~~: .

::lilol~""'----
. · bearing· on_. the. bid __ price _at_· the pu1:>1i_~ auctio~. . · . c~~atedJDELEON, si.Jpr.r!I' a/'542). , .. .
.provided that the::public·,aµction"was, (egl:llarly and , ·· "'; .. _ . . .· ' . -·"\'.• :, :( · ,· · ' ~- ,:, '. ·· :..
. .ho_nestly' co:r.i~ucte_cf(D.E:iEON;'"sµpra·~t:5~9):· ·. . . :· .Note: Asale:by',the.mcirtgagorfo,a-third party of'the
. . .-. \>(: -;'··· ;_{,·.>· .; . ,;, ,'· . <" .,. (_..- .;J.. • .. '.inor:tg9ged]~roperty;durlrig:th~ period f9r:rec,le_rrip'tion .'
Re~overy· of.:C?'efici~ncy a· ·· : .. =-:. , , , ~ trari_sf_ers ·only. 'to'..said·trJra pe°fson_ the right'to:r~deeni ·.
Note:.that' the:. mortgage, is,-but,a: security.-and not a· th'e ·prop'erty, and (he. (ight to' posse3s,: use, ·and·
·. satis_faGtion_orth.e indeptedne~.s (M~tr9bank v>.C.hug·:. enjoy the ?i:ir:rie during said ._perl_o.d_. · ·, - · 0:·
•• • .,

. Lt:.!,Tan;' G:if No. ,20217-6; A_ugust t-, ,20ii3X' i·.; . . . .;. '.<\' J ··:.:-,· ·. ,·:•". .. ' . .. -.. ~. - . ·.-: • . . ',,
. ,. · · .; -. · . .'. · ·.. ,, ·.' .... .;_. _:. . ,. - . ·. _'. , · Where the-~a:1/with assilmptjoh· of mor:tgage was.
1. ·'.Judici~I· F6'recl,o~L.i're. under the Rp_les ot' . no.t_refgis)er~9·.~np{made,~ithout the con~~!l~ pf-the
Cc>Ur( : . : . . . . , ,mortgagee.-:: the,· buy~r :.:there6f. w~s .· not-. :yalidly
· .··-,the ·mortgagee, iS':SpecifiCally 'given the :right to · · . substituted ·as cfeb'toi/and herice, ·.had· no~ right, to
.. cl~im_ fo.r;deficiency·(RULES OF C.QUf?'T;.Ru_te· . redeeiri'(Bonnev(e v. CA; G.R, No. L_-49101; October _
_ . :~·";~~/'$~\. 6). . ~':\' · .. '··. :,.· ·,·.. . ~4; .J9_83)./ ·_ _. <,· . _.·,_. '· . ·. . · \ . · ; _.
'~--: Ext~a'.:Ju'dici~I ,foreclos~r~ 'ti'nder ~-Act·. N'o. ' Kinds of Redemption: -._ . . . •, .
-. .,_- ~13,5 .:· ,:_. ;~-- ;/ . . . .- . ·:. ·. : . ' . . ·.· .· r: E'quity of· Redempfion.-._right_ of.rnortga'gor 'in .
Act No':-3-135·. doe? ,not give.~ mortgagee the .case ·.of. ·judicial·'foredosure to.· r!3tfeemi the
rig tit ' tci. ,' recover;_ deffciency a.fter .. the<. public - . . mortgaged, prop·erty; after '•his' default 'in the
. . ..a·uctian · sale, · neithe'r .. .d"Oes - it.' expr~Ssly ',·or · · . perforr:na.rice'. of:lhe· con·djtian·s of the mortgage·: .
. : · .. : , · ·. 'i°mpliedly prohibit- su~ti· -recov~ry ~ (DE · LEON, but before.the c_onfirnialion ·oUhe-$ale (1:6,b-Rate · ·
· :$upra at'529). · .. . ·

2ois SAN BEDA: LAW CENTRALIZEDBAR 0P.ERAT10Ns I 689 ·

 .
CREDIT TRJlNSACTION·S ·
SAN_BEOA LAW C£NTRAllZ£0 BAR OPERATIONS - MEMORY AID 2oi9 . . ..
\.~J\JN':'¥1
45!iritfSNBta:aeg,&iiq?t z;saww I «Mbihtm j.ji!£9!454§1ttxt#@S&Pji2AE:ifu #MYMiM &iiit!¥!%?Y4iMii4W¥fl
. .
l(lteinatibnal Services, Inc. v. /AC, .G.R. No. L-· Note: Notwithstanding Act 3135, juridical persons
'67496,:July 7, 1986). · · whose • prop~rty is being sold. pursuant to an
.- extrajudicial foreclosure. shall have the right to
The mortgagor's equity of redemption can b!,!\ redeem· .ttie . p'roperty ·until,·. but n9t after, the
· lev_ied. upon ·.by me.ans of ·a writ of execution registration of the certificate _of foreclosure sale with
(Looyuko-,.v. _-CA, G.R. :No. 102696, July '12, · the applicable .Register of Deegs which in-no case
2001).: shall be more than three (3) · months ·after
_foreclo.sure, whichever is earlier. Owners of property
'Period to Exercise: Within. the period of 90-<120 that ha~ been sold in a foreclosur~ sale· prior to the
. days from the date ot.lhe servlceot the order. of effectivity of this .Gen!,!ral. Banking. Act shall retain
foreclosure., or-even 'thereafter but.before tne their redemption rights until their expiration (General
order .ot ·confirmation. of the .sale (RULES OF Ba'?_king-Law of 2000, .R:A: 8791; Sec: 47). ·.
COURT,:Rule 68, Secs. 2 and ,3). ·
'·-. · .Effect ofFailure to Redeem ·
: . This. applies<to · judlcial ·foreclosure. of -real . . . The· :,buyer in a . foreclosure.isale · becomes the .:
'mortgage andchattel mqrtgage;(onJy before the, absolute owner pf the property purchased i( it is not
.· sale, in case. of the·· latter.: pursuant· to Sec: 1,$, . redeemed during the . period· of one· year after the
. Act No-, 1.50'8)_, . reqistration of'the -sale .(Sps, Tevesv, lntegra"tiicf ·,'
. . ,-. · . · .· , · -. · · :~dit &: Corporate Services Co':, G.R. No. 2167.14,
·. p~~~P,~i~n:. Ther:e is no right·of.redem~'.~n"'U?m _Tu, · ·_ ~rbtiif"-4;,.2018):·. , ·. ·. ·
a ·Jud1cial·:for13closure- sale. after. the eonfir~on - · · 1:. . '\t { ~ ·
. . .. . .
.: · . . . · ., ·
.. · . .:
· · '.
1
ot.the :sal_e;, ~:'.(C~pt· th.~s.e-•wanted~y~f ~ an~~on o).foti?n oftitle over thepr~~e.rty ·con_firms .
_ ·.fin~n~1cil:mst1tut10~.·-as ·pr~v1~jd:bt.!n~~e#(r'a1 __ · ·- the~J~.~na·~r') as . the owner ent1Ued to . !~e
:st
· ·B~mk!~g- .. Act· (~o_w ,Genw.~~~j.1~ya.~)»:
(Govern0.53n( Service 1.nsupcj.JJ,9~S,>}ste.p.-v. Tf/fl,
CFl.of/101/o;·_G.R:_No. L-4,§322~JU/y5,~989):Jf'
-r. ·l9-
J~ .
•p_o_:>s~1q~oJ:_th0e)ropert~.The:mo:-tQag~r. byfa1hng .
rede~m . )p~ all . mter~st. m t_he proper:ty. .
.('6;ahay_a\i v. _Cprhmerc1gl C,red,t Corp., GR. No.·_.-
- · ·. · · i.:..- / • Fif~. 168078, ltanua~3,)2018J.. .
. . If the mortgage_e is a banyhe/m.ortg QOr may· . · . . . .. · ~ . "": . · . ·· ·
. exer~1se a· rig_~t of reaemp~on ~·nd_tth_is~9 l~tu~e ~{ the R~~~t of ed~mp~io~: - . .· . _
''.. apphe_s_ .-~~e~ .. 1f. the · ~oi:e~9sf e. · 1s· JJ~_1c1~I £i.~ .:Ab~p~
~- pn~1~eg~ f th~· exer~1se. o(. '::'·h_1ch_ 1s
. _accorda11~e with R_u)e. 68 of"~e0R~~of.Cm1rt.
. _ (G_overnment Serv1pe lnso/.<!,.,n<jt Sys{pr:4. '{'
. · _ CF/ of 1/oi/o, G.R. No. L-~53-22, \uty 5°;(1,9'5~1-
1· ·· entirffYJ~~Pf??e~}POQ th.~.w1ll·and d1~~~et~on
P'~~ °/.,~edE}_mpt10~~~1There 1s no.l~gal obligation .
. -"'.': ~.,,_ 1.9,~ ~fcisE/the· rig~t of redempti,on (DE LE0N,.
. . ·,. . ., :· . .: ' \,~~ ~ ., .'7ASllP. a:atc5~1); 1 · . ·. . .·. . . .
2. _- ~igh_~·:of~ede_m~tit:>n ,....., right.of a-QJ._brt~g~~~er?;~atu_tOl],P~iv!!ege_...:...(rn:iust b~ ex~rc,-:ised
: redee·m ·, t~e .. mortgagecf . pcorerty· 1r(__~~n-,J]t:n}e,..JQ ~~_side a~tw1thm the ~er!oc:l pres~nbed _by .

·:': _l~~N;-sup·ra~at-~4~)., . : .· ·~or . _ ·.

·. extr.ajudfcicil: fo,reclosure· of r~al. mort~age.;JEE~_tbes!.~t~ (ji- at 552); __ . · . . . . : ... ·
tc3~~~~-J/:~~-r-_.°,f.t_~e-~~gm:.l·O~~er of t~e
. P~nod tQ Exercise~ Within one year fr'o~ovol_ves:. title .to· the· for~clqsed . property - If
·, :_.

: _.., . 'date of-r_~gistratiol') of.the ,c·ertific,ate_.of sale· witli . . · .. sei:rsona_bly· m~de, it seeks.to·eras~ from.the titl~
, . , . ·.·_.the,Reg(~fe(ofJ:)e·~9.~ .(Ad. No. -.31;35, .. Sec. 6;· . > ; '. of ,ttje_,iu,dgm.:nt-o_r mprtg_age. d~~tor· th~ Ii.~~
· - · : · • ·i · Rl)_Ef;S_:'OF-CQURT, Rule 3Q;· Sec.·,28):.,..·· .. :· . · · .: .. . . ·· c(e·at.ed by reg1str<;.t1on of the moJtgage ~n.d sale:.
,- ·... -· -.;:::_. .. _'.,:,~:.> ·.'::.: .,... .... _; ·,.· .. ·, . · ... · .. .- _'lfn.ot._s~~son~bl_y.mad~;-jt·rri~x.see~.fo(ecover
. · !=xception: In the ,sase _qf lb?Jar,:Rural B~nk v. _,_. · o~n.ership tQ the prop_erty since)he purchaser'~·
· ' : CA, the ··Sheriff placed two .. ye;,irs, redemp"tion · · · iri_ch0ate :. title< . to·: the:··. pi'(?pe:rty· : qee::oines · ··
. perio\:l'in the Certificate of Sa)e. The-bank dicl no.t. . ·... . .c~nsolidated a_fter ·expiratio~ bf the .period-.(/d. at.
· q'uesticm•.tl:le· 1:irovJslon. in tfre. certifi.eate ,qf sal~ •. ·. - 553).• · . . '" · ·. · \' . ' · .
-:-Tl:le ·s~·prerrie· .Cojj°rt · held. that ·.Silence by ~the ...
.meant'
· p~r,k consent to:tli_e .two'-year. peri!)'c:J, arid · - , Requisites qf a ·valid .. Exetclse, ~f· th~ Right of
. redemption is lib·erall~1._interpretetj_ (n .favor of the ··Redernptio.h:· :· . : . . . ' · .
. -: . ·. '' awrier'· (ib,aari Rura/ Bank ·v..
··CA, G.R. No .. · - l. Must: be,made. wit~Jn tw.elve·(12),..monttisJrofi1
'·. 123817; Qee. _17,,1999}:",. ··· . . · · . .. . · . the .. date ·of -the-:,regisirati9J1 t>Utie s.ale :in· the
·- ... . . -: ·. . .. . ..
... · - ·. .; . · .. ' · .. ,.-offi.c:e:of the-Registry,of:Propeify'(ldi- _. .,i··: · ·
,Jhe /igh°t:of'~eder:ri"ption; as· long as with(n th~.' ·2. _ Payment c>f the ·purcha~e priGe ..of t~e. p~operty· ..
_ · perioc;l_-P,ryscribed, mpy·be·e~ern~sed regardle~s invplved; plus. 1 % inter!:)st per month the·teiin,
of, wheth.er· or. not the· ·mortgag(;le i _has . . together with the am.punts '.of ·assessments of.
?Ubsequently -.C_Q~!J-Veyedthe ···property. fa ~some . taxes·thereon; if any1' paid by the purchaser a,nd
other party·(Sta. Ignacia, Rural Bank, Inc. v.. CA, · ·. the amount of hls prior lie,n; if any, .with th_e sa,ne
G.R.·No: 97872,March 1, 1994). rate .of interes\ computed. fro'm: the date of
. '

·• I·

690
.
I 2019
-~
SAN·
. BEDAL;AW
. CENTRALIZED
,\ . BAR OPERATIONS':
. .
 . CREDIT·TRANSACTIO:NS
; SAN BED(IMW ~ENTIIALIZED BAR.OPE8,4TJONS - MEMORY AID 2019 "''
ta§§tiO 1&W!S¥i?tt Wtt¥9S&N£=i¥Bii '%' 6 ,•tq'fk' ?' c
-
;t rt !:SS;;;Sf±MW*Q M#t#§Wffl' MS> ¢j#8S9§ i,-Ai 9G&MAAAf9SEtii##§P'~
,, . . .
. .
registration of th~. sale, up to . the tim·e . of confirmation of the auction sale which· is· the date .
re_demp.tio_n(Id. 'c!t,554); .. . .: · ·• ' when the:¢ertificate of tftle is issued (BIR RMC
· 3. Written notjce _of the redemption must be served .Nb:· 15~2008;· ~ugust -15, 2008). " . · . . ·
'on the officer who . made the . sale, . and a . :~. .. -

duplicate filed with the Registry of Deeds oMhe . 2. ··Judieial'~ within the period of ninety (90) to one
. ·. province (.~ps. ,Yap v. Sps. Dy, G.R. Nd. "171868, . hundred !wenty (120) days from the date of the...
Jpne-27. 2611); and · service ·of · the order of- foreclo'sure or . even · .
4 ... Tender of,pay_ment within the prescribed period thereafte(, but before. the ,order of confirm~tion
to make: the· redemption for future enforcern~nt of thi/sale (RU{ES OF COURT; Rufe 68, .. Secs.
mal<~ the:·redemption valjd. or preserve the--right 2 and 3). ' · ·
of. re_demption· for· -futur_e enfq_rcement (RULES .
- ::· . ..
.._. ' '~
· OF COURT, Rule 39; SecB; A°cU\Jo .. 3135; Sec . Note: ·Allowing redemptio'n after the:laps.e of the
. 26), . . . statutory perlod; v,vhen . the\ buyer. at the
.
:, .... foreclosure sale .. · does·. not object ·but even
' Note: The:-fili~g of~ 'court action· to enforce co11serits .to' the redemption,· will uphold the
redemption, being~equivalent to):i'formal offer' to pqlicy ci{-the · law 'whi6h~.is'.,to aid .rather than
redeern.iwouldhavethe effect of "freezing'? the · defeat the ' ri.glir of . r~d.emption- .(Republic y.
expiration of the one-year period (Heirs ·of NJ. · Marawi-Mara_'ntao ·General Hospital, ·inc., G.R. ·
Quisumbing v. · Philippin_e Natio'nal Bank, G.R. No. 15~9?0,-'iiJov. 2?,./01-2).
· , .No .. 178242;·Ja_n·uary 20, 2009r .
. . . . ·.· .. ·. ,, . ·-~··· 'Itis a seriouserror-to.make the final redemption.
Summary of P.eriods of Redemption: of the foreclosed-property dependent on. the
. 1-.' Extrajudicial(Act No. 3135) . ..- .. financial condition of the redemptioner. Financial '
a. Natural ; Person _.:.... one · (1). .year . fr0m
registration of the cettiiicgte 'o( salf!ptit!J
· _Reg_istr:y of Deeds·(~ct No. 313~Sec. .
RULE$ OF COI.JRT, Rule_ 39;~Se~.28). · ~- · ·
__ . . . · ... : . . ~ · . ~
·

·
~dempUSP,jl.';_.(HfYield.'.Rial(l!
I '. ·::
No_: 1'3
·
'Persons . Entitled
·
to
1
- hardshipqs'not a ·gro6nd to extend the· period of

89,'1.8/'SeP_.terr;ib.er12;
. , \ - · · ..
Exercise
Inc. ·v .. CA; -G.R. •
20.0~);'-
. .
·. ·

Right . of
·

~ote:-.°.~he_ statutory perJo.d of ~&°demp~i()n is

only .dlr~ct?ry·- ;,md ~a~qe '_ext~naed b,~
. R~demptj: nl ~·-.: ·.__ ... ·.:
1. tv1ort,9agoro_n 9ne, 1,n. ,pnv1ty._ .of .title with th_e
. , · '. :· : -. · ·
agreement of the part1es,grovi!!l~.d:. · . ..,. . ·_: · · ._.·,. rn?1!9aggc (£?
_LEON_; s_upra·at 56?); and. · _
f.- The .aqreernent to e~ten·d~volunta[Y; . 2.- · Sl!lc::cessorst11Fmte)-esl. · '(ACT · No. 31'35, as
ari<;l· · . ', amendes!Jj_y."RtA. 41'18; 'Sec, 6) which includes:
ii. T~~ · debtor · ~ommits . to. r2ay. · .t~e . . ··'.a. ,Asslqneeor transferee Q~ right-to redeem; .
, r-. -redemptlon price . on. _af't fixed date· .. ·: b .. · one :_..y:~o. succeeds to.· right of debtor by·
_(Gajudq, ti.. Treders Royal B~nl(, GF . ~ OR,_!;ratior:i of Ja0;. · · - r- • • .
'.'
.... _-·:..
· ~o.-1.51.0~_8, ~a.r:ch 21, 20p,?: . · · · ·"" c .. · Jeiri_t deotors or join_t ?Wn~rs. . .

b .. : Juridir:~I ·~erson - same. rul}\,as · ·eayment.of R,!:!deniptii;m

. .. person; . ' :.- ·.. . .• ro·whom:'.:Ttiei':pwct:iaser' or-.redemptioner. 'or. for
.. C: .Juridica,1.--Pe'rson"· '(mortgagorf.).No._· Bank ' hirri'tq the offi~~_r:whb' made'·the sate'''(R_ULES Qi=
_(ri19ftgagee). - · th_ree· (3) _.months· after COURT,:Ru/e 3.9,· Sec. 29)._·.' · · ·· ·
toreclosure -or. - .before· re·gi~tration . of . . .
__ce:rtificat_e-9f fo~eclosyre whichever Js·giarlier Mediqm ot'payment:. It' may·be maae -in·cash or in ·
~--- .. (R.A. 8791,·.se~. '47) .. · 'ch'eck (CcJ-'v:·phi!ippfne .Nationa/-.Bank; GJ?. No. [- .
· ·:~.- ·. ··· .·. ·91j67, Jufle'·29, 1982).-·~~ ... ··- ·
. N9te: By an amend~ent of t~e General Ban~ing
. ,· ~ J.aW·. :. of . 2000, jl,lridical. · mortgagors · Jike Article 124~( ot' the 'Givil Gode--" .yh_icli expressly
partnerships and c9rp6r~tions·_are .barred' from 'proviqes for the mepiufn' iri the' "paynient'qf debts" is
, .. ·. 'the ·rigfif..ofrec:)em.p,tiori ·Of mortgs;1ged. property' nofapplicable-'(0.E LEON; supra at-·556).- . . .
: . . ..... . .. . ··. "\.

. .· . ·sold. pursaant . to '.."an':· extraju~licia!· foreclosure,· ...

. . . after:-. the':-·r\3gistratfon of.: fhe_ ''certifica~e:,. of ~~Bemptibn by 'check 'is. ~i;E?ad~ ~~-[l~ti~~e_ci· (Co.v, .
· · foreclosare with the applicable Register 'of · Philippine Nationa(B.ank, ·,G.R. Nd. L.,,51767, Jl.!ne·,·
.. · · Deeds'(OE LEON, supra,af547).":. . ·, 29, 1982). . . :t .
. For : purposes · df ·, reckoning . the one-year l~tention to Rede~m is:~oT Suffiti~~t_
.. redemption . period .. 'in . 'case' of .'individual lri~ not sufficient- ttiat a person offering-to redeem
mortgagors,. or. th_E;l three-month reckoning manifests_ his ·d~sire '.to ·.do: ··~o .. :,\n. · actu?I and·
period ·for juridical :pe'rsons/mbrtg~gors, ··the simultaneous tender bf payment must ·accompany
the statement of . intention.·. . .
. same· ~ . be reckoned from: the
. shall- . .date ·of . ..

. . .
~nm ~AN i=u=nA I AW ('J:'.NTRAl,17J'.=n RAR ()Pl=RATl()N~ I n~1
 Cij~DtT· TRANSACTIO:I\JS
. · SAN [!EDI\ O\W CENTRALIZE{) BAR OPE~A TIONS - ME~ORY ~ID w1'9'
lliif&fo'1¥ *4i!~Mbdl-?i$_!l§!G\,,.Mf:*6thiS&itH\M4¥ &ii Si &W! ....A,ry¥
...,.,....,, ......_"'"Z!;\\J~' /¥~·! istZH<SPMWf~l·A:MbS:2 *PiNlW 14@4
1 ®¥ '85., ,

Bona fide. redemption ·necessarily'. implies a· . . . possession . of'"the ti;m-ant. 'it !,\hal_J belong to the
. reasonable and valid tende"r.of the!entire repurchase judgment obligor until t_he··expiration'ofthe period of
. price, otherwi_se -th·e 'rule on the r~aemptibn period · · · redemption (DE /:.EON, supra at.568).
fixed by Jaw can easily _be circymv.ented (Sps. Hojas
v, Philippine Amanah Bank,:G.R .. No.--_ 193453; June B,ights-of"Persons with Subordin~f~ Interest.
5;2013)-. . ' I • • 1. . Mortgagor's. equity .of. redemption., before.
foreclqsure :.....a s·econd r:nortgci'gee'acquires-.only
Amount, of the Redemption Price: · 0 . ·. the equity of, redemption vested 'in;the·mortg'agor
1. When- mortqaqee is· riot a :ba'nK·(PINT} . ,. · and his. rights are s_trictly· swbord_inate· to the
·a. .Eurchase priceof the property> ' ·superior· lien· of ,the first mortg9gee (Sun' Life ·
b. 1 °Ii, Interest per month on the· purchase price Assurance Co. of Canada: v. Diez, G.F?:. No.
from the.date ofreqistratlonof the certificate . 29027, Ociober 25, 19~8). ·
up to, the" time of redernptioru ~ . .
.c. ·. Neees_s?ry· expenses ,'--inm..irred:·. by- · the 2. Mortqaqor's riqht of redemption after foreclosure- .
. -purchaser for; the irnprovernentsimade by \::-.hiifretnedy islimited fr~ the ri_ghft0 redeem by
-him .to preserve the pro_pE:rtY d.!,!rin£fthe: -payinq off the debt secured by thefirsf rnortqaqe
-period-ofredernptioncand- . t : -:-,---:, -· '(Tizbfi-v: Valdez;,G-:R No. '24_-797;~}Jfarcfi 16,
- ....d'. --Taxes paid and amouht.of purchaser's-prior. ·._·-,·1926}. .. i ." -.

u
. .

. ilen,. if any.. with. the same rate. of interest. ' ·, .·. ~ -, . - . ' : . . . .. . . .
. _computed fr'orn
the. date of reg~atibn"'cl ~3"':'"'"':Jhes_e'cori,d':mortgagee is .entitled.. under' the
.sale- up .!O the time 0(-re9_eruwo~-(A~o. JVm9rtgage constituted in his favor, _to the
3.1 ~~;- ~n-re!a(ipn to .Se.(!~~
W,1i?ule~9.p.fff?u!es. . ...........:._pJ;yr:n~t,ot,his _crec;litthe excess of the· proceeds

' . ' . . ·.· ·_,._ ·. . : ·' :- _.' ,;_.:~.-//r~-~~~ ~f ·x·· , (,EQl/,.·r·

_ .. ···· . oi.Courti: ·:_ · , . -, --:.:. ::· T ~: \,)~
2."- .When rnortqaqee.is a·ban.,, t~.M.IJqE) ; ~ - . j~·'-
. t f'' d b th C ~~ I/". • ' . t d. :,U /~
.· · .
_i:._,_
of tHe i1uctior)° .. sale;· afterr-covertnq ' the
.:........mo_(tgag0i'f/ obfigc)tion·s to-the first-rrrortqaqee
if ie-et 56.1):, .' · -~ ·--~· . .
. a. A woun 1~e · .Y ~,t1~01:J7r;:amoun e 11"' , -.,, • .., , I· '· .·. ~.\ ~- . .'. '<- ! ·.' ..•• . .
_ under_th:e Mortgage deed;· . . ,,.,.vJ\·
4. To · e ma~ef).(!lfendant m. ·an \_9ct1on for
b.· . !nteresti,an9· • ··1 ?,: _ : , ; ;_, _
l'i, _,; for.~~losure o~~ri\ort~age (Id.). .. _ · _ .
c. .Q.ost· an? .!;_xpe~~es _ ( G~neral' Ban['ng~(a/r°?>,10 ~~ _- j _: . · . . . .
1. : _. . -. . :· : . . . ._
. _ ·, 9f-20QOi R!A.£87.91.) . · _;;,J. l ~:-.: \, ··.-·
-:-t::(:~\ ~ ·N,ote:; 'f:h1s· 1sl:"noJ 1J1andatory 1n_~cbaracter_ bu.t
· A . i:n.ortga~ee~cre_9it~ in1ti~tlo~\ c;loi~ "f. ·have ~: __ me(~dir~ltor;y;·:- fa.ill!re ': tq c<;>rnPV'will ._ noL
d!SCretj9n·. tQ_. S~t··.a diffil'f~tr~pur¢~~{\_Prf~jffi.; · J'~)'.';·)l}V~d,ate, tg~e.,. _jl;J.C:ii_~al forecJQSL!re. proceedings ..
·from the. am_O':Jf)t me~t.ioie:d.'in ·-JREr m~r:tg~{Je. i~ .,~(0? ~lfiy effect pr/1e failure qf th~·mortgagee to
. ·.:view ot,th_e settled role ,that-an. acUon,to·f61§c%_f9 I·
~~19.rrad ·{subordir,iat~ Ji·eh-h~lder ~i- subse_que~t -
.··., must.be li~it~dJo,the:amounLmentiohed";·_1,:~·~1:1~ch~er·or __bo~'is 10_,ren9E:r th~ __ foreclqs1:1re
;___ _mort~age _(Sps. ·Guevaita -Jt.-::1h~ Go~., o,fJl~~~ifle~c.ti~e·:.as. /g_a.l~?t· them: T~efre JelT!ains_ l~.
. Lending. Corp.;· G.· B: ~_o, ·-·20.4.t,~tt~:-X"'f·~~!=!f/~~oithe{)nforeclo_se.d
.. . . 2015).-__ : _ _ ·:~·ir~o~-~~ _ . _ ._ .· _ . -. .-:
equity of:recfet:J_Pl!on ··· .

·::,: --~edemption:.p~i~e i.i/th.i.s.·6·;~:~:i;~;du~e-~t~i~e -M~ ·

: :_: ini::_0rner. r:e.c.eiv.ed ··fr9·m Jhf pr_bpe(ty, .(ACT .o. .
---~~ue~ti~~-- th·~ Je~~;it~-: o(~t1~~\0rnd~sur·e·~ .
. · i:~:: pr9cee~ings· or°'the ef!e~t. 6f •alfe;iged.)ack 'C!f
- . . ·3135; as am.ended by 8:'A..4).1"8;,_Sec. 9):, ., . hotite: to·'.th~in of. su~h _foreclo";:;tire··(G. Puyat &
· · . ·. . . ·.: -, : .Sgris·v.-'Philjppine Na(ional Bant<;:'GiR. No. L-
. -·, Not~.:- The _,reden:,p,tion ·.1iice-,-foc.pr.ope£1ies . · ._: f6843;,Apri/ 30,"·{962).'~-. · · ...~. __ :: :;: , · ·,
,mo~gaged:-·-,:·Jo· .. i·Jiild:·(,fo·t~i::10~,e~.·;:~f~--t~~--l :..-· . ;1 · • ••• ;,'. • • ·•::'"'. • -··;',J ·. ·.; ·.. ·
De\.'.elopment :;. B{;mk . .-ot_.:_,the· ,:P.h1hpp.1_n·es·J1s ... "· . Ri'ghf to Poss·essiqn .9f Third _P~r:~orts· as
equivalent·to. tJ:ie remaining_ b.alance pf the loan·: . Purchaser ·· .. · · . :· : · · ··--· · .:·· ., .;,,,'
with. int~rE;)st. at,the·· agr~ed i'Pte; ·Thet.chart!;!r;iof··. . Th~ p"urcl)as~r.in.an. ~~tr~-Judic·i~IJo'r~~lo~_ure.saie is· ·
. "N~:~
. Q.13.f? '(E.Q.: a\ (1_9.,t36),, as~:air)eh_d~c:l:.~Y R:-!\ . ·en.titled·to",th~ po:Ssessio.n:·of ihe-·.property .and can,.-·.
:· - -, _-: . No. 8523:); pemg.;,~\~P.~~ia!'-art:d:.sub·seqo~nJ;la.~,. . . dfuniand ihafhe'be:;p!~ce_p. in .pos~·essi0h;9f th_e s.ame-,-:
. _ ·amended Act Nq: .3135 _ir:,sofar_ ~s:. redemption ' ". eitber··du.rtn-g,,'(w,tp. bondf or' af.tet · the:- .e~pir._ation .·
,·
. . - pric~. -i~ :COJilC~~Qed j(!),eve/op,:n~[lfB?ri.~ of.~th~ . ·, '(witho.4t/bond.) :of;. thi r~_d_e_mpti9r:r"-p/rbO·. th~r~fo~ - :.
· -- _. p~ftippines y/E~,;;_jr~nm.eo·(~l.'Aqµ_ati?, !n_c.-;·G.iR. . · (Sps.{Marq'cH§z··v,: $ps~· Alindog; ·G.R.<No.-' ,18.4045;
·. :No.-174329, Octob(!r20, 2~.!0) . ., ·. <- _Jar:wary22, 2014):° .. · .., :,-:·

Rentals R~~ei~e:d.b~·.tne,Purcj)aser·. , ; , . ·: · ·.. :;· , .Bet~ie. exejrati?n>of;/ederhptio,n per_iod ... · .·.

·. :rhe'·p·µrch<?~-er,pr}~qe!Jlp\1orie~, sh~JI ;r.io.t be-'enti.tled · Rosses9.ion:can ·be-;a'{ailed ,of°.as lo.nif as··;m ex,parttJ
to".rec_eiv:e .th.e.:,ren(s •. e_aming·?~,a.hcl income of:.the ·, n:ioti6n. under .0atb' before .th~ laqcl /egis.ira}itin'.'i::ouii
, · . prop'e"rty·.solcl ,on, exec.ut[o~ 'or' th~· :"'.alue- of'·the;,tJse· · ·ii·fiied·ahd-:a b0rid irvamotint cbrr'e$p,oncling.'to the
and occt:Jpation thereof .whi)e th~- pr_operty .is,irJ the value:of the'°'use of prop·erty accqr.danc·e\~itt:r-Section··

r .. 6_92 1 ·2ois SAN.-BEp.A LAW CENTRAL'IZED BAR OPERATIONS

 -cR:EDl:i-: . TRAN·SA.CTl'CfN:S:
. . '. ' . . . : SAN BEDA LAW CENTRAL/ZED.BAR .OfERAJ/ONS::·"!fEMOf1Y AID '2019 . . .
hff2!& f!iW?iSS¥i!&-:"4ts;r~n,~;5!*' ?4E14, J#5E! :--041 :a 7!2: #:tM$i.$:t&% t4:y&ittn'1:tf4#t:M:t iPWR¥tH@i·» DNS!ffel:tc, et1fl'.ll'Z
r
.7 of ·Act.No .. 3135. is posted (Philippine. Bank of Rea~_i:>n: Until'th-e for~closure. sale of the prc;perty_in
Cqmmuflications v. Yeung, G.R .. No. 179691, questio~- is . annulle_d . by _a court competent . of .
'December4, 2013) .. jurisdictio[l, -the m,brtgagor- is ·bereft. of vcilid title and
.. ' right to· .prevent the. issi.Jani::e · of -the· writ· ·of
. After lapse of ~edernpt_i_c;m peri~ci ( possessiciri ,n favour o.f the buyer (Yulienco Court' ·v.
. Purcl:laser is not obliged to bring a :separate ~uit for of Appeals, G.R. No._ 131692, June ·10.- '1999). ,
. ~- . ."·. ·.· . .
possessio_n.' He must in_yoke the aid of the-courts and .)'

ask eiiher _ for a writ of posse.ssiori or bring an When Writ of Possession is NOT.Available,:.· .. ·
: apprqpriate indepen9ent action; such as a suit for 1. :_ Where .mortgage~ : property. uride,r:_·· .lease
· ejectmenf (Javeiosa v. CA, G.R:.' No. 124292, .• .. previouslyreqistered in Ihe.Reqjstry of eroperty
Deceinber.10, 1996). . . : .. :, .. ---~- :- . .-_- or despite .. non-reqistration, the-rnortqaqee has
.' .. .prior ki:iowle_dge. of.the existence.and duration of
Once title.to.the property. hasbeen consolidated in . ·.Jhe·lease (tbescov, Caguioa,: G.R. No. L-132619,
·. the.buyer's !lame upon failure 'of the mortgagor to . . ·.A.ugi..rst 1ff, 19,86);. . - .: , ,:. -~, : ... :... ·
feq'eem:the·ptop'ertY within the 6'ne~year'redemption . 2., Where rnortqaqorrefuses' -.to ·$.ummcJ,erproperty
period, tt;iei writ-·hf possession becomes a matter of· · sold;. the .remedy [s to fil~. an ordlnaryactlor, for,
,, .riqht. beldngin"g -to" t~e :b'1:1yer. Consequently, the I. •. : -tha.recovery _'l)f.-: poSSElS~iop,:ir,i',or~_er: ,t.b~t. t~e:'··.
· , boyer_ can "demand possession ofthe property at , ··· _ ; mor:tga9ot rn~_y.be given,oppo~un.i!y.tq.p·e,h~ard
· anytime, Its right to possession has then ripenedinto' , .JDE-~EO['/,:sµp,:a. at 580); or · -., . ': . .:-.· .
· ··.the ·right of. a· confirmed. absolute· owner and tfi~·, 3. When,thir9 party is lo actual possession adverse ·
issuance of'the writ ·becomes a mlnisteria: functierf . to the: judgment .. debtor. (RULES .. OF CQIJRT;·
· that does'-no] admit of ·tHe- exercise .of the. courf _· .. Buie 3~, _Se,c.-·35;Ac(.N9.:3135.S~c ... 6). . .
discretion (Naf]lalon_ v.' UCP~, G,R N_o: 112504,·Uu/x _ · ~ 4; -W,her,e :purc,l;lase 'price, is. _gross!~ inadeql!ate._.
31, 2013). -, ; ·.· : · · .. '. ,· .-.'J (DE L~ON, sup,:a.,at.581}.;, , .<· , . . . ,
. :.- '. . ·. ' . . . . _ . ·.. _ _.. . , · _ . . ... : , ~- _- . 5. Whe[.e 11}0.rtgag~e . fails. t~ . ·,pay.-; sffrp_l!,JS to
No bond 1s requ1(ed ·of th~ p1,1rchi?ser. "af!er the · mort~agorc.(l_d.):, · · ,.·, .
redemption period if th~ pfqperty is· not rede_emedr
. \JVaiv~r of Sec_ur.ity.- by ~ortgag~e ·· . , .. · . .:-;:"" '·
.(Sps: Espiridion :"v. ·CA,, .G:R. No. ·146933, June
.. The
V· mortg'.#gEt \ay i~stltute ,~~\per;~. P,e~son.~1. action .
2,006).-~·t·, ·:_: . · .... , · . :-'~ ·: .· : ,.,"'
. Rea~on:<The bon·d 'isc,orily· necessary wt,efr the.
· for, de.bl .Jt
a e~~f ct1c;m to foreclose. the ·mortgage. ·
. . He· rri_?yf_~iye.:. the _tig~t to. for~c!o~~ '.~is_. ~prt~·aQe
purcHa~~r seeks 'a.: writ of-
P.O~ssiori ~ling .. the
anq: maint9in a perso al action, for:re~ove1:y, of .the
r~demption _pe,r\0d to' enstJr.e t.~Ef prote_gtiori' of 'the inoeb.tedness. . ~ .. ' .... ~ : . . . .. . . '
. rigi:l!~ ·o.f: th~ jud.grr!ent ·~e~_tOf in- the tVen thaJdtie . . . .• .
s~_1e··i$ sefasid~.· Bt::it·w~ere i,th.e reoeq1ptior.p~r1,09 N~te: · I~ .either.· case, he is·. entitleci' to:·--o.bfain a
bi3s already.expired ~nd·.a.hell{ title fias b_e:en ssutd - · · ,, · , · . ·' · · ·
· ·- iri ·ttie;·name ·of the -purchaser,: his ·righ1'0V(;lr the :~efrciency_ju.dgmen} (f!f L~)ON,su~r·a. ~.?~9).... _ ...
. ·:. prop·erty_has ·b~cor:ne.' ~bsolute. so. that ne li.as4be·--~-.Options in Case .of. peath o(Debtor. .,- , .
right to b'e_ p9qn pos~ession thereof which. th,e,co'urt GerieraF"rU'le:. A, secured· ,creditqr holding·'.·a·· real
!TIUS\~id _in'~~.<;:tin~· (Sps. E_~pirldfO(l ':··'G:~\ No: G1B,
... estaJe morfga'ge -has• three :·dts°tin¢(.: independent,.:
N69?3;--Jun'e S; .2006).:-._· . · ·•. ·-·: ·· · .. ·""!11"7 .. · . arid.-: 'niutuaJ!y . ex.clusiv~ . re'n)edie.$-· _that· .can·· be -
.'•

~i'iriisf.e·~ra1;.'ojly.·;~--~;~~;e:·Wr.Oi
. .
t :oJ ·F,.osii.-~ssi6n
.
. ..a1lterTn_ati.Ye_lY.J~tuhrsuedtiri,~~~· 1~~-lrri_~rtgtha~or·t?iesd:,.'b't
·,.' ~ " 0 'A(~11ve ~ r1er
ga9.~.an,,·/ 91,1;1 .- e en,ire_ .• e .. :
'
.
. . -Ttie is.:ii'uahc¢; of a-writof j).0$5-!cl_ssion. in f avor:cif _the. . . · . , from the ~state :of. the· mortgagor; as an· 9r9inary; . .
. , .pu·rch!,!S8f.Qf ~(1 ex.tra\ju,diciall/fo,r"~clefSed pr9perty - f. : 'C!a.in:;·, •. , \ \ . < ·,· : ,.:~' ~:'.: ·. •,:.' ·, . . :
<· '· · ... · I .•
• con'stitl.ltes·only·a:n:iinist~ria\ ·q_uty_.ori the· ·plrMf the ·· 2 .. ff.O for.eclosejhe: IT)Orlg~g~ <iuqicially and~prove:
· _ co'tfrf (Sp$,' .:Ma'r'qai}z:.-}L_-Sps.: /l,fihdog; 'G:_R: No. any defidency as an ordinifry claini;'.-and :. · · : .
.C1B~045, Jiint/aryf22!'2014}'.- · .. :·•. -· · 3 ... t6 r~ly 011 the·mortgage .exdusiv'ely;c fo'reej'osi1\g _
·-. the sarne :at any- H'me hetore. it··is bar~ed;, by
.. ·Exh~ption: _l)nl~ss a.·tJiirtj·party·is.a_ct~ally. holing . . prescription withour.a rigM_t~ file·a d~ini_for:apy· .
r,.
. the prbperty'·b_y'apverse title:or right (RULE~:OF · · '. · deficien1cf'{Perez:v. PNB, G.R.' No-::t...-21813;
. .. : · · . CO/jRT, Rule' 3§}/ $ec. 33t · .. · .. , :·.: '··: · ) . Julf;30;;}§66).· _. ·~ •' . .- ': 1 ' •. •
• ' • .• • :'..:·. • • . • • .,: • ·.' • • • • • ·, ' • ! -:,. •.• : ... • ' • • • • • • : ••• -.... •

·.!.
... · .. .lnjunctiori·N<;n Allowed. . ' . . .. ' · Petiti'oii .. · fo:r Annulment of Foreclosure
. · Injunction ·,to )rohibit ·the, [ssuance of -the W~it of- ·. P~oc.eedirigs · · · .. . . · : ~ ~-'
. Posses.sior\ is .no.t allowed· (Ma·nalo v. CA, GB No: · . · 'This petition. conte.sts ·. the ))r1:sum~a . riglit of .
. 141,297, October. 8; _2601); just·as.·a. pending. adio'ri · - ·ownership of the buyer in a foreclos,ure· sal~ and:puts
. for. annufrrient· of. mortgage or for~closure does. not in ISSU~ suc;:h ·presur:n_ec! right, bf ownership while an.
- stay :the .{ssLi°ance. of. writ.-of possession (Baring ~-. ex parte petition for.:is·suance· of a ·writ· of posse·s·sion
· Elena ·Loan and Credit Corhpc!,ny, Inc.,· ~.R. No. . is. a 'non-iitigious proceeding (DE LEQN, supra· at-
· 582). . . . ..
_?24225, August 14, 2017). · ·....
 CR·EDIT.TRANS·ACTI.ON·S
. SAN BEDA LAW CENTRALIZED.BAR OPERA!IONS - MEMORY-AID 2019 .,» ··- . .
~~*1!UE!Pit4G ~f4i$+tASC-t?f251t\ifi#u&:. ?®MW'? 5Si#d!a#IS§Ri'tta@Atilt3i
~f-:Wt!4:Mi!Wiiti5AW4S!rlW1M£hi§wt!59S~
. ,
Filing of a -petition for nullification of- foreclosure . Reason: To forestall the use-of antichresis for
proceedings with, motion for. consolidation 'Is not · purposes of usury · (DE__ LE9N,, · suore at 598-
allowed.as it.will render nuqatorythepresurned ~ight 599). . · . · ., ·
of ownership, aswell as the right of possession, of a
buyer· in a- foreclosure sale (Id} · · 3. Nominate - it has beer) given a specific name by
the Ci.vii Code; and· ·. . -. . - .
Remedies of Mortgagor after Foreclosure s~ie ·4 .. .Qbnsensuai -'-·the Civib Code .does. not require ,
1. Tt,'e 'preliminary step ts _to ·file a terceria '.(third delivery _of the immovable to the creditor (Id. at.
. party claim) or an affidavit of. claim with the 598~599). .
. Sheriff. implem·enting the -writ. By .(e'.ceria, the.
sheriff. would ri6t be bound to keep· the property . ., ·special Requisites: .. · .
and rnay.be-held liable. for darriagesJfower· . 1. It cari.cover only the fruits of_ an immovable
Sector . Asse"ts & Liabili(tes - Management ' · .property but notthe immovable-itself (Id. at 600);·
Corporetion v. fi:1aunlad Hornes, lq_c.; G.R. No .. : . · · ·- · · . , . · .
2 f5933;'February a; 2017). • . " _ .. . t•fot~:"Artj!;le ~ 30_6· of the. Civil' Code gives parties
2.: File ari independent civil _actio"n · to nullify the tbe freedorn: to . stipulate. otherwise. . Th~
fcjfeclbsure 'sale on: the grollna·' of failure to , reduction of th~·amo.unt of fruits available to t~e- .
. corn ply with -the requlrernents- of 'auction sale, . creditor does R~(vary the nature of·the contract
(ACT N<;>. 313.5, as arrie_nded by R.A. ~ · : . · .. ·. · . · ·.. • · ..

3: ~ie a ~etiti~n- t.inde/s~c:: a··af. A;t. ~_' o. 3j§§ i~

the co~rt whi?.~, Issued. the writ o_Ppq,_~sffe:>~
Uf\ IDJlivi~~f}beimmovable is necessary only .fp(
!Qe cp:i.5.!J:t.0~9.r~c~1ye1ttie. fruits and_ not_ for the
set' aside: the sale __ and can:'.2el fhl'e/ wnt of· · cq~9_5:t~o ~,b_1n.a_mg (Id.), . · , .' .: · ..
-P~.s~essi_on,· 1t _r:nust· be·'f~~~dr.n_ot~1er11J.g°"'.30-i~ .. 3-~·m·o~nt ...~f- ~J!{'c1p_a1_ and. interest must be
Qa_ys a'.ter the p~rchaieJO"."r,s· given . th~I ~~ W -~~1fTh! . ~)1.t~, Oth~rw[Se, _'the contract Of
poss-ess1on of the property (la?)¥ , ~ 1f , : 1& anti~hres1s'fl}al\ be v91d. (c;;IVIL C_GD,E, Ar/
.
. N~.t~: ~egardless_._of ,~fie~t ·ere)S pen 1119
/. . .·
_suit f9r _-ai:imilm.~_r.,t off-tn_~~~nlortgager .or 9e:7-'I
J'\ ·
. . t..~'A-' · .. 2134j; ana, ( {} . :
4-.-J:~PTfS.S'. 9gree~nt that the debtor ":'ill _give
'1:I t.2~P~~~~~s1_on fr"t~e yop~rty t~.. the ~red!tor: ~rid
. .. · · ..

.;, ·: f~_~e9[b~\Uf~}~H~l.f:: the· Py.~Jl~}tI~ -~~titl~{(Jq_::'Jl;·; u;-;~ !ha,~the !at~er»1Jl1)1i~r;1y_ ~~-e-_fru1\s. t9 the,_1ot.~_r.est;

x \'·:.'·
. ~~It of pqss~ss1on, ._.y1.t~_ou~ greii:ia'i~~f.(~he~~~ : 1f,. a11.VEr};9.e.n.Jo- t~~ gnnc1pal of his cred1~ (CIV.Is
eventl)al .9utcome of \~~::£}~_id_ ~~s_e_ ~~-hi
_Constr.uctron Corp .. V. BPt, ·CSR .. No(!; 76871~ .•
Juf)e 8,.20.Ql).. . .
At1,r {J._y.,· z . .'v . . ,.,. ;
rj~ C©~7:rt.- 211.32¥1:f. , ~·· · . . :-_..
."{f.>., ~till . '~ ..L~~8~--~~1.en.ce·_o.f tris 41~ r.~qµisi~~· .. th~ ~~ntrac.t_ '·
. , '.:- . . . . . ~--- ·

· ~- - . · · .· . )' _ · ~cf11 b-~~e~me_d JQ be or;ie of, m'ortgageJOiegp ·

R~tf~hale: To allow ··the. urcli~s·e*.' . -~~~j~ ;.,:.\h _f_%na~ndo/ G.(3,; ,N_o. -L}5128, ,4,ugus{_ 2~,
. po:5ses;sion of the--.fo~~-clo_;,e~operj:y "'.'j!C_?~f~ ~60).~ •.:~··_. ._.~: . , ' · ~· ..
. delay.fo_r suehJ>os.se;,s10.n 1s founde~i~ist{gh~- ""\\. ·J, . .:;,. . .. ·· : -·· .' : . . . . ,,, . . . ·, -_-· .
·
of 9~!')ership·(DE.LEON, supra al~a~UJ.
. '.- • . • . . ·• 1 . · ,. -"-...~
M1\..1· ..
:
oi~ne .. obhga_t10n to .Pf!Y·.m\e_r!:Jst J~.'IJO.t)~e
· IVl ("\.l.e!i~E:J~ce .. 9f-.-th~ .. contracJ ·.of, ant1chr~s1_s,. _ttiece
.. : -: .. · .. · ·. ·. . •. -. ,.. , ~lng nothing · 1n· the· .Code · to show . that
,. . . · .. · . \: ,:. · .. ,· .... , C: > :.· . · antif\1fesi;,_. i~/onl_y ·applic_abl~ · tq .!S~G_u-ri.nfi:th.~:,
. A,~TICH_RES~S. - · .1·, pay_ment of.-:inlerest-~e<J~ing· lo.in~. Or:i t.he· ·
'· :. · ... (AR-J'S. 21,32-:)?139).. coritr~ry.\ a~tic~r:~sis_·'._ is . su~c;;e~tibJ_e- . qf
. · · , .. .: .· ,. · : ... ,·· --. . . ,· . . gµ~r_ar.i!~!:lll)g al! ·kmds _9f. .obhgat1on~; .vyhe.th.~,r
. . ., . .~ . . . .. .. . _. . .purn :or, concJJtional. i{l · natur.e (QE- L.EON;"slipra ·
. · .Soritract _qf Antichresis_ . . . . . . at 600). . '· - . . : . ' - ·:i: .
. A co~trp~t- whe~eby th~ creditor .acqL,J!r~s. thf:: _rjg~t to . .,...
. cec,e1ve. the fruit~ of. an 11:nmovable-·property-._of the. · · Mortg?g~~Jn. Poss~ssion : .· . . . . ... - ·
de°l:!.tor,. wjth,: ihe. <:ibligation · to, apply. them·. to the . Orie.w~_g li~s layVfully a_cquired.J!Ctllal"o~-constr0ctive· .
P<:1Ym~nt 9f tbe. interest; i_f owing; ancl th.~~eafter to . _po~session .·of. !he premises under. an.· _inyalid ..
,the principal of his cre_dit-(9IVIL CQ.DE, ArL2132):, fofecl9sure proceedings; .standing.up0n :hi~ rjghts a_s
. . ·: ·. ,· . , . . . . . : : . . · ·. < - . : .· ·m.ortgagee· ~nd riot claiming -unqer.:anotne( titli,dor '-
_-:char~c,teri~tics: (AF-NC),-.: . · ·:·. . .. · . · . · . the purpp~e·; of,;enfotci,:ig)1ii·-.s~curity_0\ip6ri· ;s.i,f¢h
1. . ~ceesso·ry - :it..secur'es ·tre performance of. a· · pr.opertYo~ m_aking its incifme. to pay his .debt (D~ego
princip~I obligation;· · v. _Feinanqo, G.R._No.· L-;1_5128, Augusf;25, ff/6()). ~
2.: .Eorinal:.... it-must be: in a sp~cified.form to bevali1:f r.
i.e. in·writirig (CIVIL CODE; ~rt: 2~4). · His. respe~ti~e rights. krid :obligations.·are. s.irriilar .to,
.. . ,_ ...i . the 'partie~· ih ·a co'n.tract o{antrchresfs,.such·:lhafif
- the" n:io~gagee acqlikes 'POSS,~ssioh-: in .any. 1a-.qu1.

··, ......

694 I 2019 SAN BEDf>. LAW-CENTRAUZED-SAR OPERATIONS

 CREDl·T.TRA;NSA.C·Ti(l.N'~S·
SAN BEDA LAW CENTRAUZED BAR OPERATIONS - ME(liOR'(_AID,;0,9

manner he is 'entltled to.retain such possession until

: . the indebtedness is . satisfied and the property
· redeemed; that thenon-payment of the debt within
the-term aqreed does not vest.tneownershtp of the The . creditor., . .'' unle~s- The c~editor ha~'no s\Jch·
property in the' creditor; that the· general duty.of the \here is.stipulatibn to the· obligation·. .
mortgagee. in possession .towards the premises is c;ontr9ry, . is. oblig~d to
. that of the. ordinary prudent qwnef; that .the pay the ·. taxes . · and
.-·mortgagee must account for the rents artdprofltsof . charges upon'the estate.
. . the land,: any amount thus realized going towards the ~. . . :.' . . . .... .. .
..;. ( .

discharge .'of the mortgage':'g_ebt; ' that .2if the'

mortgagee .. remains in .. the possession . after .. the '
mortgage- debthas ·beein satisfied, hebecomes a
tr.ustee for the mortqaqor _as to the excess ofthe It is expressly $t1p.ulated There is' no such
rents a)'ld profits over ~uch debt'(Dia? v, Merideiona: that° the creditor given obligation on part . of
. · · .· 'eta/.,· 'G.Ft No. L:,2~82,4, Ja_(l~ary 1~?6).:. ·. ·, . 3p, . p 0S~ession · ....
0 of.
the m~rtg~_gee .
••I • .• ,J • • • .... •:. .-.- : • ' ':- .·.-: ' • • • ' ~. ·~• : ' . property : ..$hall apply _all
··Applicability of OtheYArticles · .. · . , .: th§. fruits· tli.er¢of to th~
The ·last pa~agraph of A(iic_le·.2085, ·and Artitl~s-2089 .paymeht' of
i~terest; if
· to ·2091. of-.th~· CivirCode· are. ·applicabl~, to this 9""'.ing, a_nd thereafter to
. c~ntra.ct (Ci\/11) CODE, Art .. 2139). · '_- ·. · ..··. 'the principal,.

- An. antichresit is ~(so indivisibl~ :in :~ature)CH//1..:

CODE, Al.
2090-& Ar:t. ~139r· . - ..
- '
._._-Aptic~re'sis ,'( ... P_le~·ge ,._

~ , Provisions' ~aic.~tiveot" a c·aritfat_t. of M6rt~-~g-e: ·

. · J. The ~g~eement· -that the, full · amo~_nt · of
·. inclebtednes\ must .be returned to the lenders
.. b~fojt thfborro_..y'ers c~u_ld·demaQq the returnof-
t~.P.!:,9.1?$!!-~...~Qicr.-~s contraryto an antichretic
. . . conta_c~_wh~~fi~J~.e products ofthe. Ian? s~ould
· · . · ·. : be apphed,to·tfie interest and then to pnns!pal;
. 2:- . The. use ofthe term "mortgage" in various-parts
. . . of the. contract; .and . . : : . -. . . .
3. The_agjeem~nt that· the· lenders are not t.9. pay.
~1-----~·renfals on _Jhe property in .conslderation of, the

factthat the borrowers do-not payintereston 'the.

\um wh_i.ch they obtained.as ,3° loan '(Id: a(603): ·
D.ebtor. losei ··~Jrit,:cil of. t~e: :s'ubject ~atte ' ' \ • ,:·'' I.~. ·;.,. • • • ,·.: r • : '• • •',
. ·~· ~ ~· ...
contract: . ~ - , · . .
...
· ·. · . . ·-
· .. •... t ... • -~ ,... -
Meas'ur=e- of Ap.pll·c~!ion of Fruits t~·· rntetest and
Principal . ' . · · · , ,. . .
The· actual. market value· of. the fruits. at the .tirne of .
. application th~_reof to the.interest.and principalshall
be the measure o( S!JCh application. (CIVIL. COf?E,
. ffrt. ?1.33). . ·. . . . ..
- .. :··
. Rights of
~nti~hretif ·credjtor: . . . . .
.1 ~ T!le rig!lt to. the. f~uits and income ·9f the ihing
:i-· (CIVIL GO£?E, 2~ 3~),:. · Art.
.. . .

: :{,·To. rci.tairi the thirig uniil°tHe. debt i; pafcf(civ1L

·. · .. CODE,' Art. 2136, Par. 1);' '. . . , - . · . .
p£.~-= ~~-~~~~~~~~
dedito( a~qui"r"e'i. ·'on.fy
c·~editor .. doei/ n.ot ti~~e· N.6ie:. _The_ .. pr_operty ·. d~)iv;~red· ·;ta~d~ .as ·a
. th~ .r.ight:'fo rece\ve.. _the :aiiy.(igt)t to '-,reciive .·the . s·eqirity for the. payment of the. obligatipri. of the
'fruit~ of the R[6per(y;. fruits; but. th'e mortgage · : debto.r in .antichresis .. (M9.capinlac v." ··'Repide, .
fie nee, it ·. :does not 'C(~ates· a. real' right"'over GR. No:-1.857,4, -s"eptember_20, ·1922j. ·, ·
produce real .rig tit'a ,· •the- p~op~rty .. _-;. . . - . . .. : · ·

2019 SAN BEDA LAW CENTRAL:IZED BAR·OPERATIO.NS · 1· 695

 ·SAN BEpA LAW CENTRALIZED BAR OPERATIONS• MEMORY AID 2019

.. The antichretic debtor's complaint for recovery Remedies. of Creditor in Case of Default· .
. of possession .·of .the jeal 'property gi,vert ~s If the debt is not paid, the, creditor does not.acquire
. • I · security must be dismissed if. debt has not been- · ownership of the ·real· 'estate, since what .was
_totatty" paid' (Sos. R·e.yes 'v, Heirs o( Melence, -. - transferred is not the. ownershlp.but merely theriqht
· (3_.R.' Nd. 2.19071, Augu§t 24; 2016}.' . ' to receive fruits (Civ1(::_cODE, Art. 2137; DE LEON,
.· . '·: ·' ...... ··. '· ... : ... ·supra at 605-606). -:

\ .

cnAT;~L··Mciiti-c0xdi·,i".· :·;: _:··. : :.:

(A:~T-~ •. d·:r4·0'. :_ ~:-·2.:i:4:1:}··. , ... , · .
.,....~~~~~~~--,---"-'!~~.....,..,.........,.......,.""'!""""'!· .
~-\ff .'. · · ,4 ·~. •>!.:~ ·~:~'
'·;~:· ·, ;r ,~,~~·.''1.': .' ~~.,~/:
.1.~ :.: ;:\~~~ =, :,.) ~·

t...Jote:· A.It. provision~'.' on: ~fiqtte1,·_A.1qrtgage =!_a7.e · · ·

repealed: by, RA.'. 1.1 (}§7. o! .o,tf]er0its·e. (IJPWQ·as~.tti~-:' ,,
Pe.(~.qoal · P(9perty . {iecµrity A~t (f?.P.SA) ·effecJ~'(~' ·
'Septembets, 20'18:., · ' · · '· ·
. ·.. . ~.-.;. : . . ·. . .. . } -. .: .
'PP.S.J\ _..was :pa_sp_e<J<- QD, ·.A.µgust.Jl,.·201:8:,:an.d, tp,o(<- ,, •
ef{e.c;t 0n §.~pi~m/;?~,rJ .. _20) 8: Th~)f1p/ef1ent~.{io~' <!' :
· ..b.~~r.:.
'3.. : To . \h,~:~:,~_~QE:lSS}0f·i ~?<P~-~~es:.\fo(
its ·. : .thif _act, hq~e/~(,_:)c.~JJ b.8: ~cinrf (tion!? · ·u;:/)/}.. t~/l .
. . preservation and repair. ·(CIYIL · CODE, Art. :- R_eg1s.try_ be1ng'·estab/J_she9._ ?,nfi .9p~tcJti.on,~I· .un_d~r.
, . ~ 2f~5f . ·. . . : . . '.-. ,. .: ·,. · : . _ .. · ,: . . . r. · ·. . · S~c, i 2.6_of th_e ;P.f S/J. (f;.A: ·.. 1.1 Cl§!, -?,fC.. 68r. T_fie1
. lmplemen~in_g ·Hul~s J!nd Re·gulatf.~_ns ;.Of .Pf.$.f\.,.-. .
. 4. To ~eri'c!ef :an 'acEdu~t--of :th~';fruits to· the debtor likewise, has. nqt b:een,)ssue.i;f ~s..
of the' date or- ..
(Nedet v. CA, G.R. No. L-46623, March 4, 1994).· prfn(~fJ9 of th~s Me'rii?jry°'Aief. . .

.. 696 1.,2ojs sAN srn.i L.Aw·cENTRALIZED BAR oPERATIQNs

 ·* 4¥WHW EE HMS a, f SS S&S:W-HG ±EA

CREDIT. TR-AN-SACTI.O'N S
.... SAN
· OEDA LAW C::ENTRAL.IZEDBAR OPERATIONS
·. - MEMORY
. .. __ __,. AID 2019

.Contract of Chattel Mortgage· . Properties Held· to Be Mortgageable Under.

A. contract by- virtue of which personal property is · the Chattel'Mortqaqe Law: . .
recorded . in - the Chattel Mortgag'e Register a? ·a a.· Share's .ot stock in a corporation (Ferro .
security for-the performance of an obligation. (CIVIL_ . Ch'emicais, Inc. v. ·Garcia, (3.R. No.' 168134,
G;ODE, Art. 2-f40)-. . 6ct9ber 5, 2016); ~ · · , .
. ..
The definition provided, by, Sec.: 3, Ad No. ·1508· i~ . Note:.df. the· owner· of the shares is not
considered inaccurate because a chattel mortgagee, ' domiciled in the. same province where the . :
. i's. not entitled to- the. rnortqaqe of the personal corporation is domiciled, the reqistration
property as the chattel mortgage is merely a 'security -. must be made in both provinces (DE LEON,_
. for the-loan'(Serra i/Rodriguez, .GR. No. L-25549,. '\. - "suprci at
61~}.: ..' . .. . .
· Apr/(22, 1974/ , : :' · .. . , · . · · . .
-, b. · Interest· in. the business;
. ·.._;:.... :~/- .
( Note: If the' movable; instead· of .being recorded, is
delivered "to
"the· :creditor 61" -a' ;ihird person, the . Fieason:.1lis:a-person~1·prope-rty capable. ot
ccintract· is'·a ·p1e~~e· aA'ci ·not -a chai:tel;mp'rtgage appropriation (Laure{' v, Abrogar, . GR.
..' (CiVIL CO_DE, Art.721_~Q).. ''· :· .. , '; · No. 155076, -F~bruary ?7, ?006);. :· · ·
.. · ,• '1•.. . .;, •.. ' ·._.· .. ·.

Characterfstlcs: '(Af..UN) ''. . . ·: , .; . · • c:.- .- Machinery tniated ~y tbe parties as person?I

1 ~:· ~ci::essory -·it is for the purpose-of securinq .the · . ·p~bperty. ·sub~e~ueritly installed on leas_ed
. , ·. 'performance of-a prlncipal'obliqation:' ' . land (Davao :-Sawmill· Co., Inc,· v. Castilj9,
2. .Forrnal -··registration in- the- ChatterMortqaqe .. ·G ..R No .. 40411, August 7, .n35, see also
;: ··-Register is lndispensablefor its vatidity; · · · ·. Provincial- Assess·or of."Agusan' ae/·'Sur v.
3:: - Unilatera' -': it· produces only-obliqations -on '\lie . Filipinas • Palm' Oil Plan.ration, GR_ {Vo.
-. : pa_rt-of .the creditor to free '.tnE(thin·g.:from _the 183416, :O<itober 5,.-2016); -:·
. encumbrance upon fulfillm~nt of the obligatic;>n; '? .:•:. ·.··
4 .. -~Qminate - it. is _given_ a specific n~e bY, the.\_ \/~Sfe11 but '.it_ is es?_en°i_i~ that' the m~·~tg~ge
'Civil"Code (DE-LEON, supra-at _609). ' .: ' · .. is· reJorded · 1h the office of· the Philippine
.....• ,f
·· ccfas $~ard of'the port of_docu111en\ation of
0

·L;:1ws·~over~ing Chattel !Vl<?r:t~~g.e:_ ,, . 'i.5~ch 'tes$els (P.b;:'15?1); .1-· · .··_, · . , .

\ ~~~~~~~~~gag:
2. ·-' Civif.Code· ·
L~~;
·
Acf.
.
Nz. e• .:.<.~;J;eh~~ ·: • .
__ ...
'. . . .. ··
3.' ·Revise"d Adtn'inistraii've .Code· '<. N_o.fe: The)ilortgage must also be re~istered
· 4. · -l~evised Penal C.ode·; and. . .· : . ,' .. ·.. , · . in the LTO· and .wi.th~ respect to vehides for
. s·.. Ship- Mortg.age. i:Secree'of'1~t8, p'o. '1521, in . QUbii~ se.rvic\:)S, the mortgage. must be
- case of mortgage: of vessel~· of aomest:.;;ic_.._ __ ..,..,._ ..... ar:ip~ove,d by·ttie nFR_B.:to _make it effective
. . ow_n~r~jl'lp, (Jg. :at.-6_1',?f' ,. ' . .. . .· . ··.' againsf •-the public. ,arid' the 'Con'Jn:ii,ssion ,
', . .. . . ' (Montoya · ,,/:: Ignacio, . G.R:. Nd; L~5.868," . ;·
· Sjl'~cia_l R_equisites: .. ·. . . . December·29; .19'53). ,.. ' · .- · .. ·: -- .
· 1 .. It can cqver .only per.s~nal ·or:.rj19vable, property. · · · ' · · ... , . , . _ · , , . , ·. . . .. , _.
. . ir,;geri~i:~i- ... H~wev_er..-)h~ parJies:.ma(tr~-?1t- 8?.. .-.- .f. ·. House .:o( 'mixe·d. matefrials .· (Luna· v.'
.1,,,'
. ·. ·p'Efrs_on'af·prppe_i;ly i~a.t whic;h _by its natyr~ .W.ou"ld . Encarnaaiori/ G.R. No_.. ··.L-46:)7, June .. 30,
tj:e :re'aJ · _1Jrop~rt'y _ (QiVIL. CODE,. ~rt;· ..2140;, ·Apt,- -1952}. _,
,filo . ..1508,.S'ec.,°2); · :· · · - · · · ·· · :" · ..... ,_;-, " ·, ... •·'. · · ,,
. .' ; ·'
.· . · . > .. , ·
r-. ' .· • I

.. ·. ...
.

1,
·' . .

•
"·.

.>:-.,.·. ·. · · ,. _.. ·
Note: A real ·prqperty may ..be· -~ons_idered_.as c(
9
. .· .. :- ·:····Hbuse.:,ih!ended···,to·
· LEON, sµpra at-615);.
....

··be :.dems>lished
. .
(OE

\. ·p,er.s.onal ·prop\:lrtY, for. putpo"se~ ,of. exec~ting a ... ~ ·.. . .

.. ct)~ttel rii_o'rtgage thereon. asJ9ng_·as :!He pa"i:ti!=)S_ Reas·on: Whi:!t~are .re9lly "rri"ortgage'tj are. the
•.: . to the. con.tract so. agree anaJio-. inbbcent -third 'materials thereo.f _a.nd they a"ie.· ft)erefore;·
· · .. ··. ·p13rt( wi)I . be jreju~.i~~d. the~~bi ·9pc( ~he ·person?l ·property° (Id. ~iB15). . . . .
, ··_ partie.s .. $0: agre~p,' they are ·al(eady. est9pp~d. __ ~ .. ·;J: . - , : ,. · · · , ·.
· ··from: clairri"fng- otherwise.· (Mak~i( Leasing, and .
Financial' Corporation. i( Wea(evei,.r~~((le Mi/It;;. . .
..' ·h .. -House puilt on. rented .l~nd"(id:· at 615);
', . . .. • . '.' . . . ~- " . ... . . . " .
<<
Inc. G.R. Na.·{-58.469; May-·16, 19"li3, see'also ·. ,·· 'R.~a'~~n: .It ·does n~t fo·r~· part of .the l~rn-9. ·
· Serg.'s., Products, · Irie. v. PC/ Leasing~- and . An"cibje<;:t. placed on· lq~d by ·one ·v'{h~ h~d
Fi:1_a,nce; G;_R, N_g. 13_7_705, "Jwgust ~2 •. ?O.OO). . only a. temporary right to th'e:'sa'll)e do.es-not·· ·
~·=- •.. becbri1e 'immobilized b.y attachment (Id):' , ·

. 2'019 SAN BEDA LAW. CENTRALIZED BAR. OPERATIONS I · 697.

 CREDIT TRAN·SACT.10.NS
SAN BEDA IAWCENTRAUZW BAR OPERATIONS - MEMORY AID 2019
. .
:51:.'1!@,«;;,a2w~<:z@Mh11i',
.
£.: .,, WtPM&Jt&?¥SH.\&&&M f:k¥$n MLW1@ 1±s1:g;v!Wbft·ttw\':fAW4fft WSM·h:&tGd#§§Mtt.:&!?.¥25'5
. A¥~
•,

i. Machinery which is movable in . its nature- Note: Although the parties to a contract may treat
and · becomes imm:obiliz~d .. ·only· by certain improvements and crops as chattels, insofar
. d$stination or purpose~(Makati Leasing and as they are concerned, it Is now settled. in . our
Finance Corp, v. W~arever· Te.)(tile_s Mills, jurisdiction that, in generai. and so far: as the public
. Inc.,
. . G.R. No.
.. . L-58469,
. . May 16, 1.983);. and
. is concerned; such. improvements, iUc1lling under the
provisions of Article 415 of the Civi_l : Code, are ·
j. · H:Ouse of stro'nQ materials (DE.LEON, supra immovable property (Id.). -, ,
at 616);.
As· a consequence, a mortg~ge constituted in the
Note·: It may be' _considered as. personal improvements must be susceptible of: . _
property;for purposes of executing a chattel 1. R·egistration as c1· real estate rnortqaqe; and ...
· mortgage a_s long as: · . 2 · Annotation on the certificate of title. to the I.and of
i. The pa·rties·ta the coi:itrc!Ct agree; and: · . which they form part, although the Jarid 'itself
ii. No innqcent . third · person will · be. . r11aYi not . q!?_. subject ,,t~ said. e,r;ic.L!rnberance
. preju~_iced thereby .(I.cl.): . , .. (I[!lent[r10.y. -Beltszer, ·G.R, ~0 .. L-14597., ,fi(far.c~ ·
tr,-,
1961, ·see afso Mentepe: v. CA, G.R.'._No,
2. Reqistratlon of .the m9ctgage_·with '.the_.Chattel .· ·.. 1255.85, June 8; ?005). · · -· . · . ·~- .
.. Mo~gage· · R~gister ""'.here ·the_ mo~tgaQbr . . Extent of Chattel Mortgage~· , .· ··

prov~nce, reg1_st~at1on
_:eqwre~ (Act No. 1~08, __ Sec. 4),
m bo~t-
.h u,
re~1~es .. If- the~prop_~rty ,.s-; located ma. diff~~ ch~. mortqaqe: shal(be deemed to coy_er: only

·
prov,-. ,ces is
. ·. ·
prol:lerty describ~d therein ara not like ·qr substituted
~n{perty_Jhereafter ac~~i.red ·_by_ the rr_,o~g~g9_c a~d
· · : . · · · ·. · i~ ~ . · '. platifd 1rt.he~· same depositary as ., the property

i
.3. Des__~~1pti_0n: of. th~ property as~~~~·E;f.!Jblejhe _ " ..:...originally mortgageq, anythjng tnthemcrtqaqe tothe
.... parties or..ott)~r,.pe~sons ._t1.1.~:·~¥,tti~af:1e 9~ cbntra"rY, no&ii'~hst' r:iding (Aci No: 1508;'-Sec. :7, Par.
'\.'f · . . . . - :-· . ;;.. ~ . ·. ·
13t°94, Ja.nuary.29, -19.6_0 hi
(Saldana v. Phil. Guaran~ (Z,i!nc., Gf: .
after reasona?le · 1nve.~~g~JJ~ni ,arid I 11:51u1&1 }.

..
No. If'. · ~
"'aT. ~ ·
'"' · . "\ · . ..
r)""'-' ~Qt~::... e provi!i0Pci0es not.re~er ..to.those.alr~?d'y
. '. . . · · _.· ~; · · ··. , . 1f:E;l'J,isting ~nd origipallt ~n~luded at ·the date· of t~e- .
4. Accompanied_ QY ~.n,affl~F1v1t-0J good.fa1~h s_tat~~JL~rfstitution of jrtgage ·(PE. !...EON, .suprf! at~n1,
Jl$). J ·.... .·J, . , .. . ._- --· · ·...·:·. : . . . : . ·.
th~t thy ·parties · swear .tha«:j~e -~~age!i-.:1~'@.filf~q}9J,. . . . .'
m~de for the pu,rpose ofl5~qmg-th~~~1 a ti.ans···, ,- ·
. __specifi~~ in the .G<?_T1.tji_ti0nf ,Jh{r:eo_f~~ni1@r ~-~ {l§tipl!latk71ncJ,ua..i:q{ After-Acqui(e~ ~rope~~- .
9th~r ~ur,poses, and the! isgm~_i:l'JUS~'&.,_~I.,~
. ob!1gat1on and·not. one enter~.d-mt0.for Pt{!P-Ose·~ !o'piTufis: J
~~is:.4~10 a_~d bi~dl~~ »'rer~ ;t~~ .a~<?r~~c;qu1red. ·
l: . . . , . . · , , , ·
~~·fraud"..(Ac(_No:
. .. . . .
~5.0~. -~=c:
5);: \. ·--~~-:
... , . , ~~:~.
. ~ ~/)~re~IN~I.o~ oio' in~~s.ubstituti~n . .for-:g69~s ·an
Sc
lENi1~tiand, or . / .•.. . , . ... .
~ote.: Al;>senGe. of. th~ al'.fid}vit 9t.;i~~lf~L~~ha'sep with,the pr~c~,fo_s 9~ the. ~~l~<of ~u~.n
vjtiatE:!s a mortgage orily as ag?i11~t th1~ertJ.ns_____......g6ocls (Mendoza v. C~, G.f?. ·No. 116710, _June
·- : Witho'Lit no.fice. (P~ilippineRefihin_g:(1e~r:J.l!~,.. ·M /\...1.2'iJJfo15.. . · · . . . , . : ; . · . .: . .
G.R. No. 41506, M.arch 25, 1[)_3~) .. , ··: ~ , .. . . ,_ . . ·, ..
· · . · · ·. .. ·. . . - ·· , Chattetrv,ortg_age_v.: Ple,qae.·.·:. . . .
5. -Jl.Cc!ri · cover .or:ify. obligatio~s .existing-.a·~ i~e::time·., . '· ;-: ,:.: ~,· · · ·.' · ·· i,; · •· ~'--: .: "· ·· '
. ; the. mortg.age 'is. constituted.. . ·:- . . .
. ' . . . . . ,.
._;·
.. :Note.: · A · m6rtga.ge ~ont.aining a stipulation in: "I'"
-: •
,, ·,./ : • 1 •• : ~-. -. • ..~ • ...,. ... • • ,•

. regar.d t.o:f~ture··adva'nc.es ir:i tne ·.er.edit .yvilJ take .. 1. · Both are executed Io secure perfqrmaoce of a
effe~t only fro"m .the dat~··the.sarneare'.mad~·anq ... · priridp'a[dblig~fioh; .... : .. ' ';, '.: ,· / . · ..
:not from :the. dafe of the· mortgage "(Jaca· v: . .2.. soih 'are constituted only on personal ·property;.
·Davao L.umb'er.·C.o,, G.R .. No. ·L',,2577.-1, :Maret,' 3. s6th are indivisible; ~ · ·.. !_ · _: : -': ._.. ·· . · •
.29, J 9{32j. .
0f"'

. , .'. : . •, • • I • "'r"" • I' \..., 1

•.._ '

4>.Bcifti_con_stit_utfa ljen Ofl the P!~perty; ·· ·•· ·.. ·:. · · ·

5. 1o·b-oth cases, thefcre'ditor. cannot ·appropriate ·
· Mortgage· of Irnpro.vements on Land . . . . .th~. prefperty ia·ljimse"ti irr P..ayni_er:it of th~ debt;. . .. . : ., . ~ '
· For. ~lJ!po?e,s, ;of/_tliei- :Chattel· rvtorti;iage . law,, bo°ih·. ·s'.. lriboth 'cas·es;when' tti'e d'~b.ior.~efaults,\t-ie
growing.crops and. large cattl~ are-personal property . p~operty.rnust h~ ·s~ld}o(the ·paymenl-of)he
~!though they are· c.on?ider.et.1 · as immovabl~ .under. ·1·.· cr~9ito.r; .a~p .... _. .· ·. ·. .,· . : :. '. .. ;- ·
Artipf~· 4·15i N(?s.·· (~). ar,d (6). of the.' Civil Cpde (DE B9tl) 'a'n/ex.tingl,iisheq by !he ·f~!filJm_'?~t.of}t\e:.
LEON, $Upra at.617):-· . . :· • · . . . principal obligation or by' the destruction of the
: propeity· pledg·ed or.rriortg<!3~.ed);. · . .

698 ~019 SAN.SEDA LAW. CENTRAL.IZEDBAR OPERATIONS

 -CREDIT; TRANSACTIONS
. · · SA~ BfDA LAW C'E!'JTRAL,IZED BAR OPE~TIONS - MEMO[IY At0.io19
Q:ffi/&4&.,•·••,:; lfS·Z'!i* M± \*'.':-z,m1,'i!-' s_::Mt:·~ ,, P".°f!M?li.GiWE c-l\ an: :1*t1flc11 45$ lP4i@ t #1EWM2hl\ri17:istm· .
in.nocent' third persons ·.is prejudiced (DE LEON,
supra, at ~22). · ,

Venue .of Regi~tration:· . .

1. · If he.resides.in the Philippines - In the.offi'ce of
· · the register 9f deeds of. the' province in' whkh fhe
··mortgagor -re.sides at the(tiri,e o(the .making ·or
the ch~tt~I. mortgage. . ·· · . . . -
2. If he doe~-not reside.in'the:Phiiippines - In.the
province iri which the property is located ...
3. If the pr.operty'is situated in .the province different
Tl)e ·registration·. ·af the Th~ ·registration in the· from-that in'wtiich the mortgagor resides - The
mortgage shall be recotd~d in bqtli" provinces ·
. mortgage ·in .the Chattel Registry of Property i~
. (double· re.gi$tr~tion)°(Act.15b8, Se_c, 4):. · ..
. · ·Mort·g~ge · . Regi_ste~ · is· ·not necessary. . :,
required. by law.
Effects of-Registration:, .. ,. · . · ·.·. . ·' ' . · ~·
1.- Creates -a real ri'ght'-'-. The.reqistration of the. '
chattelrnortqaqe . is, an. ~ffectlye .. and binding
.notice -to other creditors of its- .exlstence and
creates a rear .riqht .or a ·lie~ .which, -, b.eing
recorded; follows the chattel wherever it goes.
The registration gives· the mortgagee symbolical
possession _.-(Northern.· Motors, 'inc: v. .Coquia,
. G :R. No.,L'-49018, December. 15,.. 197 5): . . '. _
Adds;...nothir,g· to the. mortgage --~Registration·
· · · T~e-
e1ces~ · . pf -. the 'a dds; notpi1ng to· the. lnstrurnent, considered asa _, .
amount doe· goe~ to the source of title and affects nobody's· rig tits except

Se_c...)4).
. . as -a spe.cJ~of _notic~· (St~[ldard -Oi( of. fl{_ey;._ ce.
..... . ·~ .. .York. v. Jararrullo, :G:R. No: 20329; March-.1.6 ·
'i923f . . \ . . . . . ".· > · r, . . . '
.Wit~f>~~~~~t ;o:
inh~.c~n~ ~hird ~er~·on ~.Th~~·
·.-registration aoeSjlOf bind innocent purchaser for
vcilue:"d~_9.li.Dg,.with the .mortgage'd. property. As
. far' 'as·,they. .are ·cbnc!:lrned, ··thefe ·. is ho 'fien.
l:he ·cr~eiitor \~: e~titl~d· The : creait6r .· . . · covering such- property. . :· ~ ·.. . .. . .
to' . . .. recover-'.. :-- the entit1Jd . to . . . : . · .. : .. ·. . . . .· . . . ... -: . ..
deflciency :. fr.om· . ttie' .d~ficiency . ---Eff~~t~of~Faifunf to-:Re'gister·Ch~ttel-Mcirt:ga'ge 'ln .
debtor except if ·the. nbtwlt~stc3:ncfo;1g.· any .-the:Cha~el.Mortgage-Regjsfry . . '-~ .
C_?att~I · .rnprt.ga~~ is. a .sttpulation -~d th_e con rary .· .. 't·
the. mstrument is· not :recor.91:l.d; the 'mortgage' is ,
s~_cL,1~1ty _.: . , (or , . , th:e (CIVIL (!ODE,,Art ... 21'1
5); ~ev~rtn~l~s·s abindih~ · _between· the-' p~rtie·s (BE ·
. rui:2hcise -of pe_r~o~.al . · · . LEQN, supra at o.22}.,However, the perscin.irr'whose ....
. property in installments favor the Jaw· establll:,hes a rhortgage'has· no';other:
(CIVIL CODE, . Art. right thah:'to:dem:c1nq the e){~cution arid the·re,cora)n·g.
1·484). , · o.f.Jh.~ document · · · · ,_ · ·

'-;(o-=E:=.-:r'L-:E;:0:--:N::-.
,...;_s_u_p7r;;1-·'a_t_'_9_1_0..J.~6~1~.1-).-:...,.:-. D_uty of Re~i~t~~;~f,,Dee~d~; Minister;~,:. . 'i ,, · .. ~
__ _..:c._..:_·..:....·.:....:·
':..J' ~

, .' ·• .. · .., · - . :· The·dutfesic:i{a:register._of cJe·eds lrrriisped to t11i.

.. . .~r.ealion of A.;Chatte.l'Mortgage - regisJration of _-cl:fa_ttei. mort~·ages of ·a purely: ·~re
, ·. T,~e;law 'provi_des:only for one way: ttie registration · mihis_terial _c::haraCtE:_r·_(ld:·' al.'625)': ·•
. -of J~7. personal pr?pertx ,ii:i lhe c6attel Morigc1ge . . , .·, .. - ·· · ·· . · · -·
Reg1s!er as security· for the periorman,fe of· the D_ebt Must be Current · · .· ·. · · · · -· · :· .
, obligafioh (CIVIL COD_~,:A_rl.. 2140) .. · · _ · . . . - · ,. The-debt r~fer~ed to .in· the\:iv/is· c~rrent an·d n.6t an.
. .... . .. . · . _. · obligation_ th.at is m~re1y.contempJafod: mortgage · A
- _'p,eriod .. Withln, whiGh'..- Regi~tration ·-Should ··b·e . . _th~t:. ~ontains a _'stipulation._ in r.egarq ·• to future .
Made · · · ..·.. . ·.· . adyances·in-the-credit'wilH~ke effe~t only'from the:
l}e~~: is' ~~ spec.i~~ tirn.e. The .law ·fs .sub~tantialiy . . date.the sam~rnr~ made·and ncitf(OITI the,date of the
~~d suffi_c1ently com_plied with .wher~ the registration., ._. ·m_ortgage_ (Jaca· ba~ao Lumber Co;,' G)~. No: L~ v.
.1s ma~e _bY.}he r:nor:tg~ge~ ~efci,re the m<;>rtg,iigor ha.s · 257.71, March· 29; '1-982; Marquez v. Elisan Credit
comphed'w1th his principal obligation and right of. no Corp .• G.R. No. 194642,_April 6,-?015): -, · .

. ·.·
. . .
0f""\ln c·,.. . . ,·ocr-"\A 1 1t.\A/ rrt..rrn~1 i,rf'"'\ nAn r"\nr
nAT1r"\tr..1C""· 1 cnn
 (R:EDIT TRAN'~ ·SACTI.O· N. S , . .
SAN B_EDA LAW CENTRAUZED 8ARqPERAT_IONS -·MEM_OkY AID 2019
0

. .
Registration of As.signm·ent of Mortgage . the proceeds ·.of the sale of the 'property 'at a·
There is no law expressly requiring the .recording of public auction .. throuqh a public. officer in Jhe
the as~fgnm~nt of a mortgage (D~ iEON, supra at rnanner prescrlbed in- Sec, 1'4 of Act' rsos . No:~·
624). . . :(fv1filj9t1ey v: T~ason, _GR. No. :14129; Juli3D,
1919).' · - . . -
Note: The assignee is· bound the, terms and by
2. · Private Sale -
.,. conditions of :the·, chatter mortgage. ·executed There '.is nothi_ng illegal,. irnrnoral.. or aqainst
·between the· .mortgagor_ ari_d :th~· mortgagee (BA : public order . i.11 arnaqreernent for.the priva.\g sale
F,naf)ce. Corp v'.' CA, G.R: 'No. 82040, Augus(27, of the personal properties covered bythe chattel
1991)-.'. e- · :_"rn9:[tg~g¢ · (CIVIL ·.cGDE;. ·:flrt.' 1:3DpJ.'· T~e
, . ·rrrortgagi:fr °is::1.n estoppel IQ question itexcepton
Financiai LeasinqUnder the Flnanclnq.Gompany the ·ground of fraud .. or duress (Philippine·
Act of 1998 r ••• -· Netionel: Ba_nk · v. : Manila tnvestment &
A finance' company purchases on behalf of.a cash- consuuction- lnc., · G.R .. No. -.L-27.132, ·f\pri/. 29,
strapped lessee the equipment ·the latter wants 'to . ·1971): • · · · · ·· ·
· buy .and then leases the equip_rri~nt1!g the,,less(,'le. ih. . .. ·. · ·\: ..::. · ", :- z • z," . . • ..•. '. ·, • ·• • .
· exchanqefor tb_~ latter's,, p'eri_o~ic··pa~~-i':l°nrofa'fix ed - . ; · :-"~ff?!~~-·for~clqsu\1? -~?i~s)1'.a.Y, ·b~ .. i_nitiat~·a :· e~en
0

amount of rental (PC/ Lea_s_mg ·and 'F1na'(Jce.-Jnc. v. . dunn,g my~lµntary proc~.edings as.lonq as_ leave

?0·10). :
·. . · . . :
. ,
. :
·, . ·. _ _
·. .
_·/~_
_£..,._ ·
. , •
Cqrp. tx. . . . { \/ u·
.Trojan tytetal,- G_.R. Nb.. 116381, 1 December 1f&... · ·: ......Js ~r~t.9\:?t~i~·ed,frpJ:1 \h~Jtis91v~_ncy court (Roye!
'.A.'1_ Go~-.efCl<!I §a_nkmg,. Corp,;· .. v, R~yal. G_argo
No. 179,_75_6,. Oc.!o~_er2, WO~) .. · ?.R.
Gener:al,Rul.e: It.is an,extens1on Qffa.fedftP\a~s_:isi~-{:..:. ~~. : ·. · .:· . :. >· ··:.; ·• •. ·,_-:-·'_,.::·.

,~:Y/.,:·:
buyer·. i~ :a~quir.ing, m9v_a_ble,~prqpei'ty· .(P~J.LeasllJ[! · · -~a~er:s· ~--b_Jf~ste~bl1.s.h~_<:f .to ~t!~~tF~m;·c.1?~--~re .
and. F1ranc~ Inc. v: Tm1an Metat(G~~- ·Nof.J76381";"""'~,f.'.a ·1~~~~e,x1W:~~~~f t_he c~at1:eJ mqrj~clg_e_; ~-nd. _ · :
Decern_~~r.-15, 201Q).. · .· -~ .lQ) _)._;:,·· --Zr. _T,h~i·':1_ '_9_ri~.f.~.~-~d-efa_~lt·pn tne,_?bl!gat.1onJQE
, _ · ·.. . . . - /.' ~l . .
· Exception_:: .If ... the~,--movable"-prop~rty
1l . ~
-aJr.eady·
hP.lc;mg-~d ·t.o ·t~e. bo'~ro'«er~i~~-e·;jtt:ie.-<tr~"fis~c~i.~ . 1~~ ~: .· · :\.~;,;~\. · •
{i~ Ji,~' .·:•. :·t:_.
~EON!,SUP.re a_t 6:37). . . . . . : .

• ••. •. •
:,\'(!? \': _·, ·.·.' , ·. · · .·· · ·
.. be~wee_o, th~ .p~rt1es. 1s .. a 1orn~w1_tpJ:m~rtQ9ge: in t9P.~\ 1 ·::;.S;1r.~U}?,}1q~,.to,1~~03er~~ed1~ . . . • . . . .
·. g~1~e <;>fa. lease (PC/- L.e~slrJg apd_{cman~f-_ ln~~W.~SJF]WlJ.".~~: .. ~ortg~~-~. ~}s. .P?,t; · ob.ligated .: to. q~- .. ··!I~
·."[rOJf]h ·Metal, G.f<... N_o., .. !t61a.-i,~,Defte11:Jer 15, ;z,...:.:..c::':inuepe ~~lfl clPlI n;f?zl e-.e_nfor.ce_ment of h1~ -~red1t.
6&iJ,,_ · :f,,~ . ..
20101.-
.. I
.-. · · . ,.... · _i .... \ rrf\
:\VJ ..
..-~'~.-
.. · ·
~\\. > ,in,· ·"1
Jt· h -··.. ~Av'·
.....
' "t·. ·: ~ . . ...
;'3
-· · ... ·. .· .·:.,
- ... ·.· _ ·
..
ti~~t~:,:~~i~:o";~~r\;:i~~i:~if;~t~n~. :i~,,~:;~:;~:i~~;;~o~~~i~Ytt*~;'
his ow~ P~.9·perty as se~u~1ty t~ a_no~h.er·~ ~~ig~~-o/t~trrI~y.-_1~.'~nght_ ~11(:>rc;:~,t~_e
to mort~-~~~-?acUn_n~.1.1
not),9!!d_anlJ ..'b9.un~'. w1tt:i,_ the:p(ll)Glalr·.o~l~~l~~({q1;
. only-!JPf!l !h·e_defaulU>f:tpE}.the:l~t!er,tba~.J~~r1~!or. . ...
~- · . '
1\~\.:. · . ,. . ·. · . : ·, · · ... ·
> . : . · . : . , . · ·, ,: ' ,. -·. .
,_ .. m~y , ~aye b_een recoun~e on 'the: .m?~g~ort. by M
.L!i~?J!'i~~t~ql_of~ ~:?~~F!Q.e ·,, . ·. . · : .: ·. '.. ·. ~
foreclo~ing . th_e.-.m~.rtgaged J?.roperties;~ '?nd~~p~g.ag~ecr)1a51; a~~_(th_irty" (30)_. days frqnt,ttie·
· li$qility-of -thei l/'li!p::pap}y mortg~go,ri :e~tei1.d~ 9nlydo · _\1me/tne.'.conoition 'is· bto~e-~i-~c!~_~e '.lb.e rri?rJg~g;ed,
.. ·the,;pn;>P.erty mortgaged, (<.;;erna·,.v: CA,,_.G,R:; Np. [;~ . prop_erty to. b~ .sold· .. atpµplic · !=l°ti¢tio_n QY ·a -pqpljc'
. -·· 4835$; March ·3q," 1993). , · · '.' · ::: , ,,.-·_ · . . : ; ·: · officer-(Act Net ·15QB,~'Sec:'.'1'4j: ·'3 ·. ': _:·\ · . ' ;.: .. - .
. . --· ~ . . . : ' ·; . \ '· .. · ,_ ..... ~:.
":'"..-

• i•' •,, 0 ·-:- 0 0 i.. I ':. r-. 0,0 0 0 • ....... 0' 0 0 •, 0 • • ' • -' ~ :. • ,·,,:••::

.... FC?rec.losute of Ch.<!ttel !'v'lo~gage . ; .. , -Th_e 30-day peri6d-to-fo"reglose th.e chattel'(l1\:>r.tgage. ·

· , !'ft.er:. paymf~t:6.t theA~btcw.me pecfor"f!:la.n:ce,of;tpe··· i~· the~inin,il'.n_um p~riod:~~~fvio_l.ation pf._th~fllo.dti~~~ ·.
_. ,~ond.ition·specifiecj·iri,tbe·.Pt:);:itte,I Mortga:ge,(Act,No: cond_itioh (or the mo'rtgage crecjifor to cause tne·s.a[e
- 190_~,t S.e'c. 3) ;,Jhe,,m9.[lgage:i.e must :'.disGharge th.e'- ':· at public ..a.uctio~ · of.th~ ;f11.o'~g~gi.c.l.:.~hifte!.?~it.l};~t ..
·mortgag(,'l ir:Hh,e fnan:n~r;:pfqv.[declqy, l~w.:Other,WisEt . J
., j~a~t q~qfly~.,.90.tiGfto .t~.e:IT.1Q,rtg~g9r p~d .~9~\f~g ,qf :
. he -~ay be J1eid 'liable for
d~iJ,crg'es OY, ·any ·pe'rso_ri . . . . P,Ublic [J,6tice' 9.Hif0e; pJ,ace,_. ."a!l.9. 1?,U'rJ,?_qs~. of. s_uch .
. e"ntitled to redeem the mortgage (Act No. t598,:Sec.. . · ·. .s)1!e .. Atter U)°e.~a.l~ of-the:i··~~c1,tf~t~al:p_u_o1i¢.auctioD,
8)/~i . . .··· :. _._.,: ·.. ;_, · <: . " . · . <- ::,::--:< ·: .~ ·. 1. <. .. tti\.-rigt,i(qf (ecl~rflP.llOfl .iS~/lO·:IQn!':j'et.ayajl.aqle:'tO:;ttij :.·,. ·.,'·
. R.,u~.~c·~~'-~--- .... ,-.: .: ,, ·: · ... ·.·... : . : ·.' ·. ·...·. ·,: _,:~ · .. · . . mo'rtgagor (Cabral V-. Evingelista;'~_.R:,Nq."L~·2°6lJ.t30,
·. .
.· 1, _ :Jµly,q9:'.'>,1_g~9) . ..-:,, ( ·;.::; ="-: :: .... · ,,., .. ·;:-:
. , .·If.the rnortgagor. a~faults:.in. the ·payment qfthe .
.se~_ured ·deb.t or ottwry.,is.e fails to. com'ply With ' 9f
iP.P!\~~t}.o-9 .. p~~c_ee_d~ of:}~e/Pr~~lo;~/e,:_§~)~,:
; the:conditipns,of. tbe:niortg~ge, .the··.c.re.i:li.tor has .\. .999,tsJir:iq !=lXPtf"!S§S of ~~~ping t~e,, pr9.per:f:y cinp
. : : .-6_0. right to apprQl>r.iale- :10; l;lim.s·_elf, .th'eipersoncJI·' . . ' . its. !;;"ale;. . . . . . . ' -:, .. · .. :· ..•. ,. . ·... ·.· •. ,·. :
'·· . _pr~perty (.<i;I.V(L :·cqbE,,:Arts:.. 21.41 and: ~088). · ·: .·· 2', .· _Pp'y~~rii.. of .the o~(ig:~.~io'n~ se.cGr,ed; th~ -~~Y.·
He is perrpitted. orily to· recover J1i~ creait !ram-· . 'mortgage· . ,.. · · .· · · .. · · · . ·.
.r .•

. .
700-.1 2019 SAN BEDA t,AyV_ffNTRAl!.l;ZEDBAR'OPERATIQNS
 . .

· CREDIT TR.AN·SAC~I.ONS
SAN BEDA_LAW C~NTRALIZED BAR OPE::F~ATl?NS·- MEMORY AID 2019 .
IW!&t£§¥'it! S,Srihi:9W!'M!%¢i ii :fS>5aj: ·= 3 S.i:'#4-\.~ rn;;a:"f!':JiMt ::cw•1m §9%'· {{ 0+s:YA4i@W~:¥'4MfAp~g;p;;y,&!R¥ifll~

3. Claims" of persons . holdJng' subsequent inGurred by sue:h breach of condition before the·sale
· mortgages in their or.der; arid ·. ·· · thereof (Act No. {508, Sec. 13). .
. 4, T~e-_bala.nce,_ iC/mY,,. shall., b~ .P.aid to th({
mortgage~ or person tfolding under him (Act No. ·,t:,lote:· This redemption partakes of an·.equity of,_
f568,· Sec. 14). · ·· · ·. '· .. :·_ · ·.' ··. --
redemption
I •
(DE
,
LEON,
..
supra at 628).

Right of Mortgpgee to .Recover Deficien~y When Redemption-is Made

1.. , wtiere mof1gage;is toreclos~d It, must be -rnade.'atte.r his· default but before. the
.'- If.;. in.· .an ex~ra JudLcia'i. foreclosur~ . of · ... foreclb"sure sale. After the-forecio;iure sale, 'the right
a chattel mortgage a defidenqy,exist?, . .ari of. redemption
- no. ionger exists (/ij.). . . :·
. . .. :
inde.perident civ'il.actiq_n-:ma'y oe ir:istituted for the
rec0very . of · said deficiency. : To :~eny U:ie . · Right Ac,q uired by th~ Se6on.d- Mortg.agee and.
0

n:,ortga"gE:/e., the right° to maintain 'an action·. to. the Subse.qt.ierit·Purchaser· .

· re.Gove'r . the_ defici§Hicy. afte~ .. , foreclosJ,ire , of {. Before payment of debt .
. the_ chattel mo~.age .WQt,Jld be. to .ov,erlook Iii~ ··. ·Afle( a c~att~I mortgage_ is exe~ut_ep, 1 there.
fact' ·that· the-chattel m6r:tggge is · ·only given ·. · . ·Jemains in. the mortgag0r: a ·_mere-· right of
· · ·.. a$ _s,ectir-itY..and n9£.:as·p~yment.' or· th~ ·.debUr:i: · . . redemption "and. only ttiis right .passes_ ·to the /·
· case· :of . failure .. of · payment .. (S_iJpe1:fine_s." . secqnd.; mortgagee. in case. of .. a. ·secona-
· Ttan~porta}ior:i .. po. ·}nc., .. v .. · -1,.C(?._ ~ttas{ng -.a_nd · mortgage (lcj.): . · .......
Financing·c__orp:;.G:R: No._ 15067:J, Fe~fuary 28? .·,v·; ~

2003). ·. . As· between the first and· second mortgagees,

- ' .. · it{e;latter can .only r.ec.ov.erthe; property from the .
. : ,-~-~ a.ctJgn for ;deficMr:icy -~ay b~q~gh,t,.~itbirJ t;if .: , ' .. forrii-~r oy p~ying him \ne· rnortqaqe debt. · Even
....-~ ....when the second mqrtgagee goes through the
t_en.(10)ye?rs.from.t,he;tiri'")e the cause of.}c~9r
. accrues (CIV/L-COD.E,.:-Art. 1144,. par . ._1.-and 2). --·-.:..form;iify:\ cif.:. extraludlcial · foreclosure, t: the
I..· ·.,,.' •
R,Urc~asei acquires. 110 more. than· the 'right of
. 2. . . :·~ede-~1~!:01 1 the first -~ortgagee "" .. :,_,
· 2.. After .pa~merit of; debt=:-. · , · :. · · · _
· ·. ~ .·· ·, .. If th?o~1i1iviibl13 i,nte_res"i,o_fa·ch_aitel-nfortgage:
·
1
. .i~ a.....:n:'.~9~~~- property. is .. ~js r:(_gt,t of
· recfemptr9n-,_ 1t J0flows; that .. the:Judgment .or
· attathiAg~edifor. who purchased the property at
the '.e~ecutiqn··:s~le: could not acquireanythinq ·
_ _.,._exceP,.~ .such .' right ,of. redemption.. He :,is-~ not
et"!litled_to" t1:i,r-actual'posses.siori· anddelivery of
.............,......._.......,_ tt-le' pr0pe~ty without first .'paying the .ni·or:tgage ·
: ~ ...
, . :~-, . -~~bt1.(Jd.).: _: .: :.. ... :. ·.. ~-,~. - ~--. ~ ,, ..

·. · Nate: rti~-
execution sa1e: ln ·Iuch ~-ase 'is n6_i. ;=_. ·.·. : .: · ~°i"~f;t.of.:·Mdrt;a 9:~~-.t~ .the', P.os·sessid~; -of thf ·.
'. foreclosure ?ale (tnaustrie! Finence, __ Corp -. v.' .: ·. Foi.,e~J~s·ec:(prope_rty.in Ghattet:Mortgage ·· .
.'. ;, k:amfrfjZ, (3.R: No._:L:.43.8.iJ,. fvfay-26;) 97-7):"_ · .· · ·. . - 1-. ·,., After" default · -·. :<- ... 1 . .
: . .. . :, / .' : . . . '. . \ . ~. ·, :1:J:ie: figt.it of tt,le c;:re,qitor'.·t.o. take;the··mq"rtg~ged·
Right.of Rede!11p_don_ \.md~r Ac_t 1 _50( / :_ ~ ·. ·. .' pr()p~rty. is· ·j.rnplied, ··from the~ prpvisjo.fr .(Ci.VIL .. /
., V\lh_q:JV1.~y.E~1:rcise_tpe_.~ightof Reder11ptii;>n·~. ,, : · · · . .COi;)E, Art .. 2087) which gives· him -·the right to" .· .
.W~~n th¢_e:;on9.i.tion of a 9hatt!:l}_'mortgag,$ is.!J~qken;: . . ·sell"(DfjLEON, supra at.629). · ·· · . ·: ·· .
·. .- . : tne:fb)lowing_may redeer:n:- . . .,' . ,: ·. . 1
.· !~·- '.; ..• :·_. .. ~ .· .\ ... ; . --·~·:-. .
· 1. rVfrirt98gor;: · · · .\ . ... · ~~- · ·. •• 2:. ~Before default · · . N • •

.' 2. · Pe"rsqn holding a subsequ.er:it mortgage; or_ ·; · ·. : ,H.e·1s;n-9t·er:1tit[ed to.

p0$Sess'io.n,.; Qtherwl~·e: the -
>
· 3. Sub$$quent c!tta.c~ir1g _c;:re.~ito"r ([j)E. LEQN,:sJJpra . ·. :·. coritrac\· b<=:_comes a pl~pge- (C:;IVIL GODE;· Art;,
. .. .· a( 62_7), · . ~ . .. . . • .·, ·.: · 2f)9_3)., ." :: .,·__.·, · · . : :· I.. " · . .-:' .
. . '. . .~ . . . .. . . -.

-Ar:i attaching m:edito/whci so. -red~ems, shall 'be _ Rem~dy · W~e~ M~rtg~g~r- ._-~ef~~es. -~() . "vi~1~-
. sub_rog_~ted .lo).h~· _rJ"gr,ts Of tl;ie· . mo.rtgage~ ~n.d i_S·. . P.rop·erty;:'. · · · · . o:: · ,, -.. . .. .
~en,tlt\ed .to _foreclose_ the :rrio'1gage (Act. No.· 1508, Where_ the·<:lebtor re.fuses to yiel_d t,t1_e.p_(9perty, the
~c. 13'.~ · ·. . ' .. : · .... J·.i ·:· .· : cr~ditor!s_rernedy, is to. ins_titute. a"n:·a9tiofl eilh.er._to .
. _eftect: judicial· for:_eclosure -pirectly. or to .·secure
How Redemption ·i~ l',~1ad~ · .posse~sion (repl~vi(l) as ,a preliminary-to the sare
· By paying or. delivering to the mortgagee the ~mount _eontemplated ·_in s·edion 14 of [\ct !'Jo. 15Q8. (DE. ·
. due on such ?1<?rtgage· and the costs and expensei LEON; supra at (329). · -
..
.· .. -.

.2019 SAN SEDA LAW CENTRALIZED BAR OP.ERATl<JNS I 701·

 CREDIT TRA.NS;ACTI.ONS
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SAN BEDA LAW (_ENTRA~IZED BAR OPERATIONS - M_EMORY AID 2?19 .

:\\Pfii? 6-¥f?i8¢i'f@W,<#,A&4:& !:Wt!£ t-39¢; iW, 4\ %S§ttt2#iN i&##$i'!91¢•!!£•$'1'i$W?#@..fiSN4
kt4! t\tii¢J<&:tMCb,& ?J
. . . .
The necessary expenses incurred inthe prosecution ·
by the rnortqaqee of the- action for replevin should be CONCURRENCE AND
borne by the rnortqaqor · (Agustin v. CA, G.R. No. PREF_ERENCE OF CREPIT
1Q784q, Apri~ 18, 1997}:

. Not~: In case .of default and the mortgagor r~fu~es Note: The provisions on special preferred credits on
to. surrender . the chattel, replevin judicial or movable· property, specifically Articles 2241, ,2243,
. foreclosure does' riot require the mortgagee to first 2246 and 2247; are ·repefllea. by· R.A 11057 or
ask the sheriff to foreclose the· rnortqaqe qr: take otherwise known as the· Personal Property Security .
possession ofthe prop~rti(DE LEON, -supre at 629!.- Ac!, effective SeptemberZ, 2Q18_ . .
• 1 • • • • • •

Reason;- "The· slieriff' has no authority to seize the PPSA was ·pa$sec;J on · Augii$t 1-7, : 2d1 B and 'took
· mortgaged· property. Wheneve·r the sheriff proceeds · ettect on September 7, · 2018. N9twithstc1ndir(g · ot
under· Section 14. of the Chattel Mortqaqe-Law, he entry into-force of R.A. 11057, the1mp~em,entation of
. becomes .pro ht:Jc vice.·the jnere ag~_ht of the: creditor . this act shall-be' conditioned upon -the-Registry.being
(Nortnem 'Motors, .Inc. v. Herrera, G.R. 'No. L-32674, esrab/i$hed _ant/: operetione! 'under Sec. ;_26 of the
Feb(Uar;-22:--1973, · see_ elso' Fllinves: Credit· Coro.v. PPSA .~ (RA 11.05-7; 'Sec.: 6Bt 'The- rmplemeu_ting_.
. Rules 1!ind -Regulations·. of PPSA,. ror the effecti_ve

u
CA, GR.' No: 1'15902;° Septembef27; 1995)..
. . . . -im12lement?Jtio·ri oftbe statue has not ~ifon issued as
Remedy .. 'When the . R\ght _of M,ortgagee is ~of the date of print!ng· ot this Mem_oryAif}.

~~~ief~~: m?.rt~?ge· aut~~rizes_ tn~ag~6 {"/n?r~oJ.,~re~it~~ .. __ . __ . . .. · ..

. ta~~ p°.ss_ess1on _of the_ property: pn,e~-~up~e~-- ·-- . . _Th1r)mp.h~ Jh~po~~~s~1on- b_y two o_r mer~· creditors
rnalntaln .an action· t?. reeov~~r~os_s~~~:m 2
t;..tb~- ~~ _'""o~·~q!-la~,g~o~nv1leges_~lVer the same-property
rnortqaqed _c~attel frorn.the m_oJ~~.OfJ_11;any-pers~12, J_
-oj-all of'the wqpe[ty of the·debtor (ld._-at 642)- .
in· whose hands he may _finf'th~ro~!n e~ect,'. tt:i_e . ~ :~~_. \-- · (. . _ . '. ·..
r:)10rtgagee, upqn the.- mortgago~)jS deElt· IS .t~·/'t Pref~rere of C ea1 ., . . . :.
, constituted ·. an attorney-inja~0f the Jnoi'tgaQOf r,~ _i-ffisis t e .right1,h~~Ya-creditor to_ b~· p_refe~_red in.
ena~ling s~ch _mort~a9ee 11
act-f~ll.and in ~eh:a,l~f~ ·m·srh~_"''pay _ent of Hi:s· cla1~· above oth~~s. ~tit ·a~ t~~.
the·owner (DE LEON, supr,,~30). , · ·~Lln;ya~.to·r·s assets.· tf1s·:t~e~ng~Uo be paid_ firsf (Id.).·
· · ··· · t -~ d\ "' 1. ~ ,., "I.. .
. o~~~~e·s_l~~ol_vi~g:~-~~tt~liMort1ige~ :_ _. \m,-·-:z~~.a~ur:~;,e~·E:ffed~:o~~r~f~·~e~c_e. '. .:~- ·.. · ·. ,_· ·..
1. ·• l:(nowmgly re.mbv1ng any:} p~r\Of!a~iw@ertXA c-l?~'s"n?rc~-,ul~/A.de~Jc 1s haple"w1th i:311 hJS property,
·rn~rtgagJd .Linde-~. the Ch\tt~I M°.'.figag~{!fa~o;l'.Tu . 'Wf<e~y-a_ncy-.tuture/ fqr .;~e-."'fulTll!ri_ien~ ·.. of. -his·
: ~ny provmce:o~-.e1ty-,o_ther tmai:i. !.he~n~,:~n :f.n~1igat_1?n}(CIV/L C©DE, ~,t:'2236):, .; ··: , _: · ·
·1J'was:locate1·a~ the·.t1m~ ~f~h~ exe~_~o~-~-!..~~'lENI\1"..,.)·L.,., · ·
. . mo~ga_g.e -""'.1th_o!J.l _the wntte~0~s,~oL]he~~er~1tor.~.p~e._!he'ngh~t~ p~rsu_e_l~E: pr~perty m ·
£ . · ·:·.: · · . · . ·. ' ·.
-~o~gage_e; and. . .. .· :._~ ..<_9f.1~£~sess1oo~tne·.~ebtor_Jo satisfy-their _claims (DE_
. 2._ $_e(hng ?~ 7 pl d~m~. _persona_l · ~~OP.~r;t+...alr~~y MtE.Qf?J,_"'sf/pra at_.~42): · · ; , . . · ·. _ . ·
. · mo_rtgage.d, or ~ny p;3rt,_th~~eo'., unde: t~~"'t~ '. · · . '. · : · ._· · , -. :.·._:·
. 9fth·~,6hatte[ ty1ortgage-l.::aw-~1~hout the c~n?ent _Except.ion: ·Tfle-~e st"j9u]d · be n~ rules ··a~ to who
of the· mor.tgag~e· written on: .th~ back ,Of th.e sliould be- paid -fir$t:· Preference ·applies ONI;.y when
. . m~·rtgc_1g_e anf _duly,jecor~e.d,_in·' m:e .Gfia_tt~I _there. are. twq (2). 9r _more~ creditors .with s¢paratet ·-. .,. •
. · _ .-: Mortgage··· Register .".(REVISED.' PENA/: COD~; claims against a deb.tor who nas·jnsuffjcient'pro·pEfrty.
. - Arl. 319),_ ';\ · ' · '·:· .. ·.· . --~ · . ·. . __/·\· ·. to . ansy;,'er(_f9r ~ill his·, o~jl'gatiohs'. S1f1c.i( i( :is:;a_h·.
~- .. ,. exc~'p'tion_~ ·to - the( "g·erieral ;rule;· ttie'.·· l_aw ,·:a~. ·fo
... Effect ·of_ Full Payinent..on. Crimi_nal-1..Jability ·. : preferenc~s is strictly ._..const'ri.Jea '._ (Ro/rian :v.·
·Th~Jno.rtgagor is ·riot re!ieyed,c:if trimitti:11.'·ltability- Herri9ge,,G.R. No. 225.11, Oe¢~f!lber 22;. 1924):,
~~e.n Jf-th·e._m·6~gaQe .. i_nd~~t~,~ne·~s:'ls)her~;3ft_~r P?id ·_.- '· · · ·, · · · · · · -, · ' ·: · ~·
1ntfull,ort_he mortgagor-selleunformed th~. purchaser '. _ 1 .. boel; ~ot. --~r~~~- ~n · :~~te~e-~t in·prb}~~rty.
thaJ the thing ·sold had-been mortgaged. (People v. , Pr.eference simp)y create? a right_ tp_be pald.firs.f
Alvarez, G:R. Nq. -19914, Nqv~m~'er 27, :1923). ..from' tne pr9ceeds of. the ..'§_ale "of prqperty_ias··
. ' . . - '· ·' ·--.· ·. . ·. ·· . ' against ai1ofher· creditor; It do'es not create·a lieri
vaiidi_ty· of flie Sale Made ·without.the co:iisent of -~-·on the:j:ifqperty its~lt;°but m·erely,a ·preference· in ,. ··
the Mortg_agee : : . . , .· · · " . . . ~the applicati6n · of the. p~oceeds_" of'th~ _-pr6pe'rty
The sale is valid although·no written d:msent:·wa"s after it is.sold.
'~btained·from the'mb.rtgag.e(t but the niortg'agpr !ays
-:.liirnself _open· ·to· cr·imihal. prosecutio11 (OE LEON,
s_upra at 613).· - ·. · .. · : · · · _ . ,. ..... __ .
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·=702 I 2019 s~~ BED.A lAW.CENTRALIZEb'~AR OPERATION·s

 . _·CREDIT_ TRANSACTION
.
Rt3S:,fl5rl1
SAN BEDA LAW CENTRALIZED.BAR OPERATIONS - MEMORY AID 2019
't • <, '• #P%"2 c7 :+•$ft ,':fCis· ; #?J,,:- .. ¥19" :WS.>{#,
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2. The creditor does not have the right to take the Preference of Credit v: Lien-
property or sell it as against· another creditor.
Preference applies after a sale, and it is a ···""'
question of application of.the proceeds after the
sale. · . Preference of cre.dh Lien: on the other hand, ·
3. It must be asserted ... lf the right claimed is not
applies._ o.nly . to ~I.aims. creates charge on a a
asserted and. maintained, it is lost. if property. which do not attach to particular prope_rty.
specific properti~~· ·. · · ·
. has not been seized, it is open lb seizure by.
another. ·. .
(DE LEON,. supra at 644).
• • • ! •

14. It must be· maintained. . Where - a creditor

. released his levy, leavin'g .the . property". in Lien shall refer lb. a statutory or coniract~al claim or
possession of the debtor, thereby indicating that judicial ·cha.rge on r.eal pr persgnal . property that :
he did not intend to press his claim further as to legally entitles a. credfior tq
resort to said pro'perty for
· that specitic property, he is deemed to· have payment of: the cla.im c;ir debt secured by such lien
.. abandoned his claim of preference (Molina · v. ·(FR/A, Sec.4) . ' · ...
. S(?mes, G.R. No. 10.105,.fv!arch 31, 1915).
"/
: Not~:· Lien does 110t, .in its ·general sens~· import a
. Rules on'Preference Applicable When: right of r~tehtipn-, . though'. t.his right' usually
1 .. Thereare two (2) or rnorecreditors: · · acc;ompanie·s the li~ri when the subject is persona/
·2. · With separate and distinct .claims: p~opef\y in po.ssession of' thJJ lien-hold~r (Grano v..
3.· Against the same debtor; and · .\ Par~des, _G:R. No. 27019, March 4, 1927).
4. ·. Who has insufficient 'property (Pacific Farms,
inc:v. Esguerra, G.R, No. L-21783, .November l,.aw oh l,:isolvency . .
29, 1~69). · lnsolyency shall be goverr:ied by speci;:il law~ insofar ·
as they are. not inconsistent- with this code (.CIVIL
There\1usl be aproceedinq such ~s ~n i~s61ve~cy
0
CODE;, 1;1.rt:-22:{"1). . . . · . . ·
. . ~! . .
proceedinq wherein the creditors can file their . ~. .
claims, The right becomes significant·on yfafter the That sp_e~i~ law is R.A. No. 10142, otherwise known
. properties 5>(the debtor have been ~en'torL_ed~an'~ 1
,: a.s the. Fin?ric ra1 Rehabilita_tion and ln.$.ol\/ency Act of
liquidated, and· the claims of ·the various creditors ' · 20.10 (FRIA). Insolvency· is thus. governed by the
have been established ··(Development Bapk of th;f\ · :civil Cod'e; a'nd suBsidiarily, by the FRIA (DE LEON,
Philippines v. NLRC, . G.R. No .. 86982; June ·2:Z. ·
1990;-Ass.ociated Labor Unions. v. Court of App~a,y,
G.R. No. ·1.56882,. October 31, 2008).
" ••
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#
-;
The Fjnaricial Rehabilitation
(FRIA). of 2010.(R.A 10142)
:
~.--~
.· supra-at 686). · ·

and Insolvency Act

· ·· . ·
·, ·

Reason: P.rior to the proceedings·, thedebtor...has no· . The FRJA, .an 'act providing for" the rehabilitation or
. way. of ascertaininq who the creditors are; and lias-·- .......liquidation of. flnaficially distressed ..enterprises and
no liquldated .propertyout of which he cah pay the~:. . ·_ indlviduals, which lapsed into law_ on July 18, 2_010,
... superseded.the former lnsolvency.Law or Act No.
A pr~ferred ;, creditor's 'third· .party ·:claim :to;· the · 1956/as, .iim'endec:L·· · · · · . ·. · · · · .. ,: ·
proceedsof a foreclosure sale by the mc;:,rtgagee is .· :'
riot the proceedinq · contemplated by law for . the ' E,x'Cll!_Qed· d·~btq:rs·'from the op~ratioir of FRIA
enforcement of preferences-underArtlclezza t and . f. ·Banks;·· . · .: . . .. · i·
2244 of the Civil "Code - unless the· claimant- is 2. : Pre-need companies; ·
enforcinq a credit . for .taxes -that . enjoy, .. absolute · .3. Insurance compa·nies; and '··: .. ·- ,.,
priority (Development Bank.of the Philippines. v. CA, . 4. Nati_onal. a,nd l~cal government agencies or uriits
G.R. No. 12_620~, August 16, i001) .. · . · ·· (R.A. . No.. 1014~:·sec:· 5). .... ···
.... , •,
' ·~ ' ~ I . · ....
• I

_A final [udqmentobtained by a .bank depositor for the. lnsolve-nt

· yaymer:it of his timedeposit if) a _saving~·bank prior · It refers to the ·iinan'cial condition of a debtor that is -
·, to. the.institutton of l(qufdalion proceedjngs but after ., . g~[l~r~lly unable to p~y'its _or ~is li'abilities. as they fall
the 'bank was declared insolvent-would not' make-the due in·· the -ordinary_ cours~ of· ..bu$iness;·or has
claim a preferred. c;laim against:'.the bank {aa'nc.o. . liapilities th·at'are greater than its or tiis assets (RA
Filip{nef..Sa_vingsand Mortgag(l Bank v. NL.RC, G.B.'.- ._. No_."10142, Sec. 4,.Par. p).
No. 8213.5, 'August' 20, 1990). · ..
.. .\ . . Clai~s Covered by FRIA
Fixed, savings, an~ cu·r~ent deposits- !)f money in. · Definitiol'"l of Claim ,. . ,
bank!,. and similar institutions are considerec;f -simple. Refer to all claims Cir demands of whatever nature o.r
loan~· (<:;(VfL CODE, 'Art.: 1980). As such, they we t~a~a.~ter against the 'debtor or it~ properly; 'whether
not preferred credits. for money_9r otherwise, liquidat~d or_uvliqi.Jidated,

. 2019 SAN.SEDA LAW.CENTRALIZED.BAR OPERATIONS j 703

 C-RE,.Dl·T TRANSACTlOt~·-S.
SAN BEDA,LAW CENTRALIZED BAR OPERATIONS - MEMORY 'AID 2'019
~,\¥11,iiMWt es AAS §SYkh! ·Wi&WN>MS ti2&.Pf¥4& Sb 4& SMtiZAF#t®Ut! ;4. ?Mi?&ii&,#;A£4... fi&YW&44§1&:;gµwiaa2tit&¥\®$&4
.1 •
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fixed or continqent, matured.or unrnatured, disputed 3. Orders the sheriff. to take possession and control
or undisputed, including, but not-limited. to: .. of all the property of the debtor. except. those· .
'l, .Allclaims of the goyernl"Tlent, whether· national that may be exempt from execution:" . . . .
or local, including taxes, . tariffs and customs. 4.
Orders .the publicatlon: of the petition motion or'
duties; and . ,. . . . .. in a newspaper. of general circulation once a
2. Claims against. directors and office:irs of· the. week-for two· (2) consecutive weeks; - .
. debtor.arising from acts don'e in t~:e discharge cit 5. Directs payments ·of anyclaims and conveyance
their .functions falling within the -scope 'of their· of any propertydue the debtor to the liquidator;
authority: (R.A. 1'0142,. ·sec:4, Par. c). 6. Prohibits paymen_ts by the. debtor and ·. the
1 'transfer of-any property by the debtor;
· Noter lnclusion of ·pac2 does. not prohibit.the 7. Directs· all.creditors to file their claims withthe
creditors orthlro pa~jes from filing cases aqainsf liquidator within ·the period'setby the rules of
the. di redo rs or officers acting in their personal procedure; . :. . . . . ; .
capacities (R.A. 10·142, Sec .. 4/Par. c) ~ 8 .. Authorizes the . payment. of· administrative \ .
J. expenses·.as. theybecome ,dtJ'e; .: .. :

Claim must be Aqainst the Debtor . · . 9 .. States that the debtor and creditors who are not
-rhe rehabili_tatiori:.cci"urt has-jurisdiction. over.claims . petifloner/s may submit· th~ nam·es··'of~ other
against-the debtor-that is-under rehabilitatiortbut not:.' nomineestothe-positlon .. 'of liqi:Jjdator~ and: . . ·. ·
( ,

ag?lmst..th1rd_ parties (DE_·LEG_N;,sup~a·.at 693)~·'

· - · - .·~- . .
. .

:1'
L, ~· ': . ·
. .

,.u
ove~ ¢1air:i:s by th_e:_~ebto·r.?gainst~~s own debto~ets·_the'cas_e for_,h~aJi~g· for the_·e1ec~ion and
aap_po1ntment.of N).
..
the_ hqu1dator1 _which date shall.·
nt b~ les~. than th/rt.Y (~O)::days 'nor more· than
Mpnetary a~_d;Non-Monetary Claims~ . .r~~Qi:1>"-Jive.(45). days f_rom- the date- of the last
_The. f.RIA covers cl?irris of.·w~~-ve1'r_.$.1:ire .or
ch_ar9~ter. _ ·1~·: c~vers:. b0\h ·. monet~) ·.a-~"d :'n_.on~~.
rr:ionet_ary claims·. Examples;- . .' ·,_D ..
. ·_.

,'!/~,.l:':.., .
. public1rtibn'\~-~-- '.0142, 'Sec; 112):·
.. ~ ·-
Tb) -~ -~1q_u1d<;1t1~n,P..~a.9.,) \· . · .· .
1;· A claim by an employee· fOJVjllle'getl 'illegal ~- ,l~is an enl,lmerationcof'all the assets,oJ. the ·qel;)tor ·
, . .
-x.·, . · · .
.
·_ .

di_~missal __ . _(f~ic~/do .. ·_fastill?l v. ·r.Ui'l~'i!.!de__ r ):~ a,nd a {cned.JJilS!)i~l'.Ji_da_liob< of ·t~·e.· ass~ts and.: .
'1aj~~o~se Cl_u~, -~;:Rtf~16_9725,:. fnl !~i: )j . pay?e~ s_ ~~. c/air--(f P\ _1 ~?42: S~~- · 1·~-~): _: ~. · . _ .

2, · · P.rOferrEfd.:.maritim'e lien ·a~t,~,.~SS~ i:~~-~ ~.i,uidatiot~PJJnl and,.its .'1.mpl~~erltation· . ·

. cc;impany_ und~~ rehat;uh ~Jioh.py.v1rt~~u,·ripard~;:;...:- . S~l!..9.~f·e·t_he -_~orcu,rrenc_e a_nd Prefore.11.c~
· .se~i_ces ..9f th~ lie_rihold\r (~e~r..os vt$}j.{9§fioh~~ tif<?f Creq)!~_ndf ;tfi(Ciil ?o~e)_i;lcl r_elev~n.~-!~"":'S·
Co,, ln.c. v. ·9ourl of 1'.P~ett~,':G'~:fl!P"\.Jfi:~3156~ · £,~.f.J,14(e~onC?~n~~~r~pc_e· ai:id-,p~~fereJ:l~~ :of. _cre91ts ·
DecelJl_!}_er 10, 2008): ... \· ::. ·-.~/\~ ·., ~- .>~1~~We Ni&·C1v_1b~ode.:an? ~o\~err.relevant, la-«S··
3. A_ clc!1m for. .. damagE:_§. o_r all~ged .::' .clr,s'1 n:~_a1~~ .._observed mfthe.J.. 1qu1da~1on Plan· unles.~ a.·
i~fr!ngei!i_eri.t '(f!hilf~P,irie-Air?1~~· '!.n.~,. v. C@~&€f,.rn.._11 rtr~~rr¥,edit9[jt?1un~a~~y~a_ives h_is · p-~~f_etr~d- · .. ,
Appeals,· G:R.. No.-'.1'!~,0592;·January_ 20;, 2€109)~ngnt.€red1~~;ierv1ces r~ndered by el'!:)ploy~e.s· or. 0 ,
· ; (O~·fE,ON, slipra.at:'§~}~694)- -~·-. ·. :.t~~l'atl°orf~!9-\.tne.-cf~btor·.s.hall ._enjoy· firs(preferenc_e ....
. :· :' ... · . · -' :··' · · .· ?.... · · -' ,.
L1~u~~ation.Pr~ce_ss : ... . _ .. · 1·. -· ,:
r{!t' ~
:= ... .- ·.· ~~, .
M· mzi1.e~v~rr~?~4o! the C)vil c.ocfe;~~nless tlie_claims_
fc~t1!_J.!fe'°'l~gal liens under Arts. 2241. .and 2~42 .
._
;.
J:hlS I~ th.e pr_o~_ee,c;hh~..Wh_ernda1ry,_~ :ar.e:fll~d 'c;ll'l_d-l E:!'"'? , 0~n_ereof"(f?.-",4:--10142-:, ~e~.' .133). : · .. _- . . .. _.··.~ · · . : • .. ·,
assets, of:\he msolvefl! ·debtorare.,;d1sposecl.'.<;1.ndJhe . ; · · -- ·:. ·i· : · · · · ,, · ·,. ·.. ·. ..· .. , ., :··· · !:"" ..
proc_eerjs ar~rdiyided a~o~g·t~e credi_tors·(l.'.\QWNQ, . ·'. Tax Qlear.ance:: N0r·;~e_qu'ired".ih. kiquidation-.of_. · . .-
Reviewer on Cbmmerciar Lav.(. (2014);" 1 P>·.'439. ··-Banks;:.;-:.'. .. · .: ·.-·~ ·~ : .. · · .. ::~· ;'_.· .
[hereina_fferAQUJNO).°'· . '.-.. '. ,. ·. ·' · -._ • • • '. _· - Sectj.9n; 30 of. th~- J,Jew. ee_ntral ·-J3~nk· Act pro_vjd~s .

:·: :-: --/· · '{· .... ·. ,·._.-.·: .'.:, .... · . . :· ·: ' ·, .,·.· .·,: tn_at debts·and:liabiliti~s 0lthe' ba'n~ und~r li_qu[~atioh".
Ljquida,tor. · ·. ', : · , .· ' · · · · ... ', ·. are'·t6_. be· paid 'in· accordar.ioo 'with -'.the1 rules. ·an
A.1,iaturq_l_ pers9ri or jur.idi~_at~ntity deemed IQ be ;m.. . coricu_rr~_nce. and:pre_..f.-~_.rerici°e·oi~redit)u_~d.ed_h_e_ C_ivil
· office_r of t~~ ·-c:'6urf·_-A.,vit~ th_e prif!cipak ,dulf of ,. · -
P".9~erving·a~q~ma~irri1zirig !h""e ~~lye a,nq r-ec,s>:_ve!i_n~f' Bode .. · .· .. -~. '. .·. · ... ,· .:_.·-.:::· --~:.'. _ · · .. S; ••• '.'· • --.::;...-:;~
th~ a?S.et:~ _of,Jh.e d~_b_t0r,-.witt'f tt.h.e' enq of'liqyi_daJing. ·: ln·ord~·r 'to s~c~r~· a tax' clear,a"nc~ as ·;r~o/;~-~t-'t~e :
th~rn :and_ d!i5,Ch~_rging_to tbt.ext~Q.tp,q~?i.Qle, allJh.E( taxp·ay~f, ha~ cornpfetely paitl;'off hit.tBx-:l(a1Jilit1~s; .. ·. .,.- .
. ~rr;_-._~r.,ii~-:t.t_he__ 9ebJor_'(8,'A.· 101~?; S~c. ,( Pa_(._.. · • petitic:ine1-.;PD.iC will,be)compelledi·td;~ettle· and 'pay- ... :,, ·.
,• . -:. fir-st..aff .. tax' liabilities ·and.,:deficiencies. oL!he-~bank ~' : •" .
Uq~idatio_n· Order,'..· . r_egard,less .9f the 0rd.er/'ot- pre.f~ren~e- Qiid~r:-tti'~- . . .
It is an prder ~hich:.. .. . ,.. :·:, ·.· ·., ·:.' pertinept provi~icins- of the Civil C_ode (PD1C ii. B./R,
} . De~l~r~s t~e- d~~te>~ in,sol_yefrit; -. .': · .-_ , ;, ·: :. ~ ;_: .
G_.R. No. 1_72p92, ·Jun.e. -13;-2pf3)._- · · ~ ·. ··_ ·. ,_ ·
. .. ~:·
2. Orcfe_r~ th~,.hqu1dat1on. of the deb.tor: ahd ·in the.·
_.. 'f . .:.. : : .. · .. ' .
.Ci?Se'of
~ . . ·. .fjurrdicai'debfor;.cJe·clar~-
. . ._ . ~ ; .. : . .
la~-. diskoived'
.. . ' : ..

704 2019 SAN BEDA"LAW

.
CEN1RALIZED
'
BAR
.,. OPERATIONS
..... ...
 ·. · . . . 'cREo'LT:'TRANsACTlONs· .~ •
0'1:S!~&W" , i2t,@cf ;; § ~1 ·~M~~~ ~:::l~~~~~==:~::~e~;:7~:;;:A~:
::~~~~ 0~21&2s::111A-& ;,srm:dll· ¥ ••

Rights of ·S..ecured -Credltors

A secured creditor shall refer to a creditor with
se.?ured·claim (R.A.. 10142, Sea. 4, Par. kk).

A secured claim shall refer to a claim that is secured

b'y a lien (R.A. '10142, Sec. 4, Par. jj)._ .

The Liquidation Order shall riot affect the right of. a

secy red. creditor· to . enforce his· lien in· accordance
with the applicable contract or law. A secured The··. d-ebtor;. is. -~~ot _Applies. ey~~
·in.· t~e·· case
creditor may: ·· absent as .he files· ·the of absent debtor (Debtor
·1. .Waive his, right'under the security or lien, -prove Petition. .. · resides ....oufside or :·ha~
his .claim' ln the liquidation proceedings and . . departed •' frOfl! · the
share in the distnbution of the assets··of the· . ', Philippines,' cannot be
debtor; or .': '. ,• .. : found or conceals himself)
2. Maintain his rights under the security or lien. In . under Sec. 108 o( the
which case:" . . .. . : . '. . - FRIA. ..
' \ .r ,
a. : .The·'. value. of- the property may aqreed be
· · · upon by the creditor and the liquidator:
,•. · j:· .. J{ value of thepropertyls less than the-
. .-. claim it secures =
liquidator.may convey
theproperty to the secured creditor and
the latter. will be .radrnitted in. the
liquidation proceed in.gs ·as creditor· f~r . .
. . .~ the balance; . . . ·' 'J .·' ••
. . biquiaation Qrd,er.. is .L)guidatipQ .
ii. If, value of the: property exceeds the ' -- is~u'ed Wjtfiout' .'."trial issued, a_fter trial- (FJ:A.
claim secured =- liquidator may convey (R.A. 101'42' Sec;. 10142, -Sec. 107) ..
the property to creditor .and ·waive t'Jp 1 ~42- ... ·. /. ', - ' ' ,, ... ,, ,.
. debtor's ·.. right · ot redemption . u'pon ·
·-· .c • re~:eiying.e~c;;ess- from_ttie c~~1)tJr:,- ., :-
. b: · The · liquidator may Sell the .property _and
. satisfy' the secured creditor-s gntire claim
. : .. .: .frorn.the proceeds·of the·sall:l; or I .
. c ... The secured creditor may enforc~ the'.lier:) er

:· '·
\ • . . · foreclose' on the· · property pursuant • fo
· '.. -~ .. applica_bte ,',a~~-(R.A{. 1_01

.Vol~ntary l::jquidation v, Involuntary tfj~uidation

= sep11 ~( •..

· · .' ·of Individual, Debtor; .... ·

.. . . .

·. I

-
T.h~. d$bts . n:iust',be_. ~t. Tti~ d~~'i-.otaggregate of. ·
least: fiv.e·- ,.hundred debts must be at·least one
thousand- .. p~s.qs: .· )P. m.illk>a:·: . ... . .. pesoi
. ·Acts - of .. lrjsbl"'.en~y_ .Creditors must pr.o've,a,c;:,ts · soo,bpo) - · ·, .. ·. : ·.. (Pfoocr.ooo) · . .- . ·. 'or
tm.~er. _s~cJion J0.5 .o.f of if!solvency._ ., .:._· .. . ., . ,· ·. ~q'uivaJerit to 25o/o of the
the FRIA need not. be · · . : •,
. ' . .J - '• - .- . _subs'cribeg ca pit.al . or .
allE3g!3d .. ; . -: ., _._ · . • . ' ~ .. .. · · ....· pa~n~rs' · · . c:o.r;it~i~\.lti¢ri,·
, . ·w~ichever is higher.
•• •• :·. • • • • \. ,"' ,>- •• ·....... '.• ; •

Jhe ·debts must be at The debts must be at least ·'

·. least: Five hundred Five-· ;hundred thousand: The· · ·in~ividual ·. ~an The .. business
t~ousand pesos (Psoo;· pesos (PS00,000.0Q)·. ·:·wiW; 'be
continue the busij,e~s. · organization
.000.00). · ·
di~solved. ·

2019 SAN BEDA LAW CENTRALIZED BAR OPERATIONS , . 705.

 CREDl·T ·TR·AN·SACTlO·N~
SAN
. BEDA LAWCENTRAUZED
; . BAR OPERATIONS
. - MEMORY AID 2019

Exernption.of Conjugal Partnership or Absolute

Community .
There must be. an act Act of. insolvency 'is: -~·ot If one of the spouses is insolvent, the· assets of the
9f insolvency.
. .. . . . .
- - required,
~ ~o.~jugal partnership · ot _gains (CPG) or absolute
community (AC) do not pass to ·the assignee in
(Id. at 4;38-439). insolvency elected by the creditors or appointed ~y
-the court (CIVIL CODE, ,Art. -2238). . .
Rehabilitation · . _ . . -~ ' ' .
It refers 'td the restoration ,of .the debtor to a _condition _. Reason;: The conjugal partnership · of gains or
of. successful operation and. solvency, if it isshown .... absolute community· is distinct .from-the individual
that its continuance Of operation - is eeonornically · spouses (DE LEON, supra at 649).
fea'sible and its- creditors can recover byway of the
present value. of payments projected ii) the plan, ·The. exemption applies provided that:
more if the debtor continues as a going concern than ' 1. · The Cl?G or AC subsists; and
if it is immediately llquidated (R,.A. .10142,. Sec. 4, · 2. Tlie obligations of the insolvent spouse have not
Par. gg). ·· · ·
· . redounded
.. .'
to. the
-
benefit . ofthe farri'ily..(/d.). - .
. . ; .

Noter- . During . the pendency. . . _qf .. rehabilitatlon: Not;: The··i nsolvericy of 'the: husband does not have
0

proceedings: 'the court

1.
111ay
order !he d{n~~si_o_ri -~
~~~~~i}~~~~~n~rb~i~~-~ng~ to, li~~idat'.0~7i-d1~_gs
Upon a finjing that the debtor .1sjl!J..Solve~a_r~.d,_
u the effect .of dissolving the conjugal partnership or
1{/esp~~te_ c~mm~nity .(~I.V~~
,Rule,k 'Co~ow .ership .. - . ·. ·
=:
.
A~.· 2238) ...
.
. there is~_no :5ub~tantl?_l_~i~-~lif1ood~r.ttid~or f<? . .· ..
11'iJte·re-·i~~W.fl~ship and ?~e
of th~:co-o"':'ner's is
· ·. be successfully r~h.?b1ht9~~cilR~~} ~~-- ~l'(:' •";3n .. iosolve~' deblOfi\ his undivided share. or m~erest
25, Par:cJ/ · ... ~ . '/ ~~ I·.'·:··~ .. if" -~Q'."th;)r.oper:tyfs~lftl??·poss'essed·~y !he ass1gne_e
2~ No Rehabilltatiorr \l:a~ ."':,8,~, c~nWl1~d,i1th!~ O'}f . , ~ ,1n\[nso1J~ncy pr.o_c~ed1ngs because Jt rs part of. h1~
(1) y~~_r.fr_om the filing of1a pet1t~on to E~~firm:a (¥"\ ·asset5.1(§E·LE<D~'tfi}pr:cJ at 650):. · . . · -
rehab1hta_t1on plan (R~~- VO~ t= ~2, 7 1, . . . .•:: . ~ . _ . \--~ -\ : . - .- . . · ,.
]!!llrrifcl~Ef:,
3: T~rmin.a_t1on. of the re[9b1~t,1on pro\ce~~~s-,~
(sE:e R.A.·10.1f2,.SecJ&5/:-~~ :'-·: .
4. Voluntary liquidation· O\'Jll~cal debtqrs. (R.fi:.~lu'Ifl!P(eIMii GWlJ)i,Aift.
· · h:!<~ !Jiis- article r(;lfEy~ t~ ~a-ownership other _th~n
7r~h1it,....oJ~onj~gal ~.arlflersh!P' o.r apsolute c?,mmurnty
2?Jl_.,:. . · · · . · . .· · · . .
1014~-Sec .. Qp); ~n_d _
5. At .a.DY ot~~r t_1m_e'UJ:?.~.n- tr.Wc0n:m~*1~. o~
.;_: \ ~~ . . . .~\ · .
£(1i>,u
'J;;J: } ~ . . . ·.' . :· .,,
o set apart·~~ ~pt..propert1es under the_.
.
~he r_e~ab1\1tat1_9~ _rece1ye~ tryat Hie reh\Q1l11~ori~ ,_. ~F.~11(~ · J, : / ·. · . . . :· ,:_- ·_. .
or.the-debtor _1~ ~o.t· f~a~1Ble (RA~: 1~7~i~~~~l~~e)Re'd,uty:of the_:co'>urt,, up_o11:,pe11t1on ?,~d
92J.- - · · '.. • ·,"'. ·-.. ·. SczE:;:_:.,.-rat.te..Yhear-m9·,.-to ~;!empt_acid s~t.ap_art. tor the u?e
•. ·: _ . . · ·. . .. - · .• · ... ·7.""'- •·. ' l"" -1~e~~f~ .1.t:s~id ins·olvent, sue~ !~al. and.
· Lial;>iljty,of ~e.bt~_r's P_r?-~e-~~t',:f~r,. 1s·Q-6~;~l~n:5.., · rrper-so~t ·, ·prgpertyi ~s .. is ·.~Y),8-,YV exemp~ from ~
. G~~_eral :Rule_:.,.D~bto(1s: hc!bl_e. w1tJ,:al)~~-IS-Pie.Pj~tr, i· :,( r~~e~~~~~dals.o :a -horr:iestead-,(RA 10.142, Sec.
p.r~sen_t.. and-·_:fu~~re,. .f9r ·:· _t~x ·f9!~11~~-n~~ IJi.~ . 1Vl.lra~~-~- .·_. . , · -.\ . . .. ; · - ·. .· · ·. ·_. · . - . . . . .
obligations (CIV(t· CODE, Art. 2236). . . -~-~- 0_.,
_ ., ... ·, • _ ••• • ., • • .... -. . •

. : -::::.. ·...-, · _..::_ · - ·.. ,·· ·.··-:-. .. . Ru!~.lnvqlv.i-r,g·P.roperty}f~lg.:i~;Tf~st. . .. ..

. E'xempted p_roperties:. ·. .. ,. ·. . · ·. · . Property. Jiild }druJ;t by)he: 1r:isoli;,ent_.q,ebtor shpulp
· 1. Pr~sent _p'r'op'e~y,:.:.. '·thc5se~provided under Art_§._ be.'
excluped~~fro.ni insolvenqy, '·Pt.oceedihg_s.: (CfV_IL;- .
. 1~p· ~pg'}05. o~ Jhe. Fa.m.i[y:1Cod~;, SE?c. 1/3,._R.u(~ cotJi;,:Arl.:'2-i40J.'.·'· · ,: ., ; ·.: . , . . .
· 39· ·or the Rules of Court.-·an'd. Sec. 118 of the_ .· · .• .. · ,. . .· ':'. , . . ,· ·
: P~b~ic Larid Act.. _.·'. . . ::_ :· . · '.'·? · · . .:_ ·;. .. ·. . ReasJn:~The~trust~i. is·'n'ot the'._o.w11er'~f. the.·trust
2. . Fut_ur.e~ prope.rty ~ a -~ebt?r, y,rh?: obl.§1_.'.n~. _a . · piop_erty .(DE LEON; supra'._at _696).: ·., · '. . ..., . ..
discharg~ ·from:~1~'. debts. 00 account .of h1;, .. · · · · .1 ... ··., • : • •

:. (risolve ..ncy, is· not liable for the unsati~~e~. ~lairti's' Three (3J'Ge·neral ¢ategori_~s-ci! Cr.edit - .:.. . ..
of- his creditcirs. wi_{li" -said- prcipe.rty subjifct ·fo . .1. Spedal prefei-{ed credits_ lis~ed 'in Articles ~-~41 ·
- certain. exceptions .expressly provided l;>y J~w ·. · '• ahd.2242• ·. . ..... _: ·
· : (Ac't'-No. 1956, Seci.1'6B=an_p 69). . . · ·.. · .. _· .. ·. · 2. ·or~ina·iy. ~r.ef~rred credits ii_steid in Article• 2244;·
. 3. Prop·e·rty under. Leg~I custody -(DE LEqN, SUJ?(a . ·. a'rid, .:. -,. · .... · .• ·. . ·. ...· . · . . .;.
at 64Bf and·· those ·_owned · 'by · nilln[c.!paJ 3·: ,co~~b~_lr~ciit.:((non-pr~te~~eci) u.nder .Articie .
. ·corporatfons_ ··· neces_s.~ry_ fbr _ gove_ rn.m,e_nta_l· 2·2"4·5 (R..... · b1· · · p "It G. R · N. · L 5656·8·
epf.!. . ,c y, . era _a,, . , .. o: ~ . . ,
.. ·purpqses · (V,iucfa. de. Tari Toco Y, .MiirJ/qipql May 20,' 1987).'.: · . · · ' ·. · .
: eOunci/ of 1/oilo, G.·R. No. L-24Q50~ March· 25, :.·---:,
1926).. ·. . . . :' .

706 . 2019 SAN BE[)~ LAW CENTRAllZED BAR OPERATIONS

 1M#&iilW tRSMI &#NMP-
ANS d iliib H 5

SAN BEDA LAW CENTRALIZEDBAR OPERATIONS - MEMORY AID 2019

;aewm~tdtMii:i4%1Ak~W:·.:se P·, ¢&F&itis 1Wi:* · a ti ,:M. w: ~ g @fa u:7 w•0 Se:We; s · e &i!t @ee ®W?+Wi!sMB«tA ?.*fl 5:;w~,~~ ·

First Category: Special-Preferred, Credits Note: . Workers preference' as regards

1. · With Reference-to Specific _Moyable Property . monetary claims must prevailin view of the
Under-Art. 2241.of the Civil Code: ·. provisions of. Article 110 -of the Labor Gode
despite the· order set forth in Articles ~241 to
Note; This-,.1_as be.e_n emended by_RA 11057:. ·2245 of theCivil Code (PNB'v.· Crui,~·G.R.
. See .discussion·on.page: 554.. ·. ·- No. 80593, December 18,--1·989).

a. · Duti~s. ~xes_ ana fees due to the · Article 110 bf the 'Labor Code does not
governme_nt; ·. purport to create 'a lien in favor of workers.or"
· employeesfor .unpaid wages. eitherupon all
Note: Thetax rnustbe dLie on the movable or. any particular property owner by. their
: ·' (5 PARAS, supra at{380):. ": . employer. Claims for unpaid wages _do not.
'. therefore fall within the cateqory ofspeclally
b. ·Claims . frotn misappropriation, breach of _ · preferred· claims established 'under Articles
trust." malfeasance of public officer; : - .: . · 2241 'and -224Z ot.the Civil Code, except to
. . the extent thatsuch claims for unpaid wages
Noter Th~ acquisition-rnust' have .been irr. · 'are.already covered by' Article :224 f, No -, .6,
. · performance of official functions and · the . . and Ar:iiclEi 2242,- No. 3: Tei the extent that
property must . st)lf be in the hands of the claims for unpaid. wages fall outside the
..: public ofticlal. If. it· is soldto a "purchaserfor , · · , · sc9pe ot°Aii. 2241, number 6 and Art 224.2, .
· value and in ~·good faith, there can be. ·ao -number 3, they would come within the ambit
ot the cateqory of ordinary preferred credlts ..
"more claim on thesaid movable: '
. _ ·. - 'under Article 2244 (DBP v. NLRC,. G.R: No .
..........-..· ~86932; June -27, 1990),. . · · - '.,

_· Nbt~J :'.;he l~~~re; ",:must · h~ve. · been

·.' emgf~ed by the ownerof the goods, not-by
~ thefc&>~fracfor (Bc!utista v'.· 1,1_di(o,: _Ge1eral,_ · f
· G!k.:_ ,g.J:
L-~799; June 2$, 1955!: . . .. .·

· ... g.
.lE!(perses
.,~ 'of. . ·_._salvage ' . . , !;JOOtjS
upon · :the_
. . sa vagea; ·. ' ' - ' )

h.,' · Credits . between· the lindlord''and tenant .

. .from their co~tract on· the share 6.f each· 'in" :.
th-e fruits or.h·ary.est;~ .- -. . ··. · ,
. ' ,
'. ...~
;" . . ,.. ,:' . . ·, '
- : i. Pnce of the contract of·transportation and
inddental expenses on'• the goods_ carrie.d, '
until . their deli11ery arid' thirty .(30) . days ·-.
thereaft~r; ··· · . · · -, ·' ·· . : · .- · ·

., .. :.- . . \• . : j. Credit$ for lqdgi['lg and supplies fur'n1shed t6-

~. __tr~velers·by hci\el keepers on ;t_tie movables
. -,d .. ~::.redits. ~ gu'ara~_teed 'with '"ple.dge. or belonging to. th.e ·guest_ as long as ·such·
_mortg~ge; · m;oll,qbl.es; ·-:. '. ··: '. : ' .-.· '. . . -: '•
• • • I.

: ~ote:·lf.ttie c~ntr~ct is a pledge, ifn:ni"st_be' Np(e: This ap'piies so lohg. 'as- mo~ables are ,
embo_died, i_n a·p0blic'iosti:.l,Jment;:if a.cliaftel '· in. th_e 'h'ofel:·This'does not:apply' to·money
· mortgage/h rrll:J$t be.- regis~ere_d with the- · _ loahed_ to: g_yests. . ·:.
,, . ·. ,•
.-. C_hatte.1 fl.llo"ctgage'.Registry. · , . ·. '.
• I -· \ • ..> • ,• • ••, ·, '.. • • ·,: •~ \ :
k. Expenses fqr· cultivation and· harvest upon
· . ~- Credits f~_r-'the rtjaking, ~epairs, safekeeping. ' the fruits harvested;. . .. . .
'· or preservation cif the ·pr,ope'rty; ·. . ''' .'
.J. Rent for on~ (1) yea~ up.bi:)· the pr_ope.rty of
f._ ·. Claim;, _f9f laborer's -~ages ~n the wor~ qone the.lessee_existing on the immovaQle·l~ased
· . · on the property.;. and on th~ fruits ;of the· sam'e, but not on
money qr instrume·nts .of ·c_re_dlt; and
·Thfa applies 9nly tci .pe(son-~I. not to real:
property (5:PAf~AS, supra at·1380) ...
 -------------~------,-----,---------------
(~EDIT TRAN·SACT_l(lN~S.
· SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMOR'( AID 2019

_m. Claims of ·th~ depositor if depositary has Note: The preference is according to the
. · .. wrongfully sold .. the .. thing deposit.ed,. upon order of time they were levied upon'. the
;, t .t?e price of sale, . · .. -, . . property (Q.E LEON, supra- a! 658). ·

.: Wio·n~fu.l ,:akii'lg .of Mqyables Under Article h. · Clai~s of co-heirs .. for warranty in the
2241 of.the Civ_i_l Qc>:de ' . . partition of the property;
Th.e preferred creditor may demand i.t within·
·. thirty (30.). days throuqhan accion ·suqrogaforia, i. : · Claims .0f°donors- for pecuniary charges or
c , exercisiriq the right of the debtor 'granted him . other conditions. imposed, by him upon the
under Art. 559 .. of. the· Civil · Code .to recover· -~one~;an~· · .,
· pr~.e_~~y w.ro·ri~f~lly taken.trom.him -,
Claims ofrlnsurers for i~sur.ance premium for
j.
· . .tJ,9,t'~:-Jt applies orly ~hen the right of ownership 2 years. · · ·
. , )r1 .such prop,E31JY.:9.9ntil}~,ei1i_n the debtor, and, . , _ .
· therefore.it-is DO.fapplic.aqle to cases where the· Note: -Article 2242 does. not give -the .otder of
d~l;>!qr ~§S Pc!ft~c_j withhis ownershlptherein, a!?.. "preference or priority of payment They merely
-where i}_e,h?~-s9lq_'.hjs prnperw. (Pena V: Mitchell, . enumerate the credits .y;;bich·:enjoy,-pre(erence
.. "G.R. No .. l:.-;3.764;<J,anuaiY,.{5;.:1.9q8)·. . with respect to specific rnovables-ortirnrriovable .
.: . . . , .. , ..' · '· ... ·;,: · .: ·. ·. · With theexceptionof the State .(NQ: 1 ),. there is
~-· Wit'1.-: .R,efer;ence;,- to •.. Speqifi,c;.-·11JlJPO!-a6l';u Xfo · grefere_nce·. arnonq. th~ .creditcrs, only
'f

-~~B~ ~=~~
rrop~r.ty-.!-Jnder_A.ft. ~~12,_.of t~e_<;J_vil-(;o'de: . . .L e::onc1p~nce (D~ LEON;, supra a_t 653). ·' .
.. a. · Taxes.due.upon larid or, qu,lldmgQ t"\.. ~ ./. l. - · · . · . , - ,, · ·. · · ·
: : :. N~\~:: Th-;s ,· p~~~;~-~- t?J46~p~rt~~~~ i~~~~:!~. -~i-~. i\h;~i~:~~r:· -~~
.. Thus, capital_· $a ins yi~Si\-~qT c9ver~fi,. -:f: . 'Y,( reco{l~ rJqi~o\ som_ething __ prev1o~~ly mad_e,
.£~
_pec·ause if.:i.s a-t_a15,on_JnG9m!:l',.,..a.n.c:j;f.1ot on tHe _-1/J.y. sucl\ ~eP,a~r .o~,·~on~tr.~~t1on .b!311}g ~ade,
. . . property it:;:;elt(Qq L&ON_, $·upr.a-at 659):· . /\ r-~ .. , A~ce1ssa_ry bf ~~·c;JetE!nqrat,~:m or·destructron of
; , :·.,. .. .·. , ,., ,· ·f?l- _ . _. , ilj' --" t~ffii~_g, a~~q[~ei:lyexj~ted (Q(=L_EON, supra
·b. UD~aid,pJi,c~ 9qhe:r!3al~i:>rlperty_; .... : -~-? i(f;f.~t:~18?~N~TR'ers_3Ja:1 ~-~~f.·~~/2:~.' .. ,

· ·. ~9.~e: T~.E} "ra_w:.~_a.ls~s~l\tino~i~tsetween~~Sec_crn!~t}::.90~ .~,~i_n.ary

1: ~referr.~-~ ~r~dits .
. . . _re~1ste~ed· c!nd unreg~~t~re~. v~~~z!.slien:~; 1 ·~0rd_1~a.~,~E)ferr~·~~e01ts ,:und ..er ·Art·... ,-2:24:4 of the
.. . · Hence, ·any · Hen· oithisJ ~\{'~ .!3ri0X . th_~. ~~Qjvil?f_~ .... a.sf~rr:re0_'d!d .bJ'. ·':,.r1: ~:1_~· ,of.:the .Labor
· .·, . ,pr~f~rense,GrE),di\ s,t$tµ~ .(/~ .. c1t-6q9)~S>'. ~.:1• 'Qcc(~'y~ey._sji_allb~.!/efe~r,eq<i_n~Hie: prq_~.,. named:,·
.-... ·,-. · >'. :·: ,_ . , ·... , -,-·. _:,., ~ ·._/ ·.- ,· .. _-·. . . _ . 1. ·.Cr~d1!¢r S.$~1~~STe~de~es;j_ ~Y:Jc\_bpr~u,; , ..
c. "Clqims ·of labo_r~rs and _ptber:. _wor rien~h-.) /~
. enga~ed in.th~ con'str1,1ct~. r'e-c<J]struclib1:l~~-te;_~q, .;m/,,of thl:l --.b_aqor':.Cpd_e.-._diq ·.not
Z.' · ·' · .- · . · · ';_'.:: :. ·. ·.
. ; .· .~.rj~.P~ir-· ?_f. ~~i!gi_r:,g~.- ~anals,(~_1e~Lip~~-~t!.:i.e )·Yqr!<~r.~· .. c,(~i~:--.,~? .:_a_b~olut_~.IY

·,,
. ,:- 'N.or_ks; ..
:.,,·, r····
, . . ._.·. <·, ~-- ..
'--'·, ... ·.·- ·. ,_.
~Y-J ·M}. , {;, & A.'"t~p1J-~~fW:.~~
;-~-~i~;'-~Z2:12 _-are. ·still·. gryen preferences -over .the
cr_e~_1t; __ ~~~,d_1to'.s ".4"1th:l!~P~--~~.9.erA~1clp

d. ·' Clai~.s. of _furnisher~ of: rn?t~rials.. used m . -~ _ proce~ds.-.of:_that,1:frop{:)r(y (lc:f.~!:(>6~), ·: ·: >·. .· · .

. w.ork$ m¢ntioned ih_.~_0;_ 3; . . . ·.. ,, , .. ,.· - ,; · : '. . · · .. ·. ·: .·: :: ·-::- .·;_a:_.,·\;'-<: · .I_ .. •
- .. . .. . . . ,· .. -; : The_ u~e'..o"f_Jti~ phras!3 ,Jicg·pre'fE!ref)~-~·1·inArtic/e. ;
.· .:e. ; :--:·<' : •,: ' . .
:M,djigag~ crediisF
,··<·~.<~.~- - .·_· · . _·;. '. _·. ·~- ': . ,.<:··;<
·.,, N~,tE!: .,; Mortga·ge , · MU;,J_.-:,.hav·~ ·. b.een.
> ,. 'i .
1.10 of, the Labor Code "indicates tnat what it • · ·
irJtrn.d~~"to_.mo.aify i~~'._tl;l:e.);r,d,e.r..of.fp~~f~rence-
. fou"rid fn Art-2244 oftne"Civii.Cocle,iwhich relate·s, .
.. ·

. I -r~gist_e_red \ iri. -~he Regi __stry of, _Property. A to prope~y of-thfi~s~lvenfthat'-is ~ot~b-urdened .
.. . ::_. re.cordfct-:m:qrtgag_~, G~~di.t,_is,:·s!_Jp_$,rior to an ·. with·.,. liens . or-.· .. encumbrances·-· -.ere.ated or ·
, .... , -. unrE!l??.rd.ed ·. -~tipaj_p;. v,el).9.<?,·r·~·.. · ii$:!n' (De
. ~ain/to v._.yillanuf:;J1.ar .-G.R. N9. _1:. .:_14938,,
~a1_1u~ry 28, 19:61). .
·,.· ~:r~ca,g_nr~~d)YArts ,2242
" .... ' : · -.::·"·, -· : ~>Qf tt;-e'..G:iY.i.l Cppe· (Id:).
>, .;f:E. . . . ,-~\, ._: .. · : .. · .
Artie/~ _110 oft t_t~,.. L~P?¥:,so.1,$, ,~oqif\~.d. Article .
. , ·, .... , ,. ·, ·· · . , , . · . . . - · , . v .. 2,?44 of the_.G1v1I CCDde. rn twq respects~· , , ...
·:Ex;p_~·n.;~~ :,)~t:.'. ih~- . ._.:pr~i/ry~i(qri .
f. and .. a. Art.o:110 of the Labor,Code:;rem.6ved·"the- -
improve,:rier.1t-!)f _real property when.the law . , =·'. . :one~y~:a.r.: li;..,lt~tio~. {o·~-~d. ip)>Jp; ·2. of -Art.
qUfliori~E:S,fe_i,:nb.y~s~m.~,rit; : \. ·,.. ~ .. .. . ,_. :~ 2244 {(d. at 6_67)-. . . . . . ... .
: . · '.'·.· ... · :'- ;"·•-.·.;·.. -•: · _ - -. ,. b.,.A~, U~:of;tt,;e.Jefif?~(fqd~ . ~l~Q.fD.OV~d:·LJp:
· .. g_. ··~r~di,ts.aqnot~t~d l.').l~.e ~egistry__pWrope,:ty the claims. for. uhpc!i.d .. \;'J~-g~s. ·(ancJ ottier
by_yirt,ye:-pf. j1,J_9ic;)a! · 9rder, attachment or . monetary· claims)·of laoore"rs or workers Of." ..
execution; · · · if)sol_v,ent to first priorijy:(/dJ .- _. . ; · ·.
.·.I ...
) . .
. ; - .. ~ '· ' .~ ' .
~·

, . .·..
'·

7~8 ·., 2019 SAN BE-~A

• ••
I,:AW
.
CENTRAL:.1.ZED
• .• • .. J
BAR OPERATION$
• • .
 CRE.DI.T TRANSACTIONS
; . Sl)N ElEDA LAW'CENTR,fl:UZED,BAR OPERATIONS - MEMORY AID 2o'19 , ,
t!?§hS&S ~t % 51?4 =:4'!s' sb: t 4, '!~ :·#pm'=>W ! MiP;MS4¥iif¥;.i 5 6± 4!1f #:fa#!#& .. ~. t:s,iSif:S¥NHt:·5 :4 %#3:e;;~ W PfiMGt,¥J:i~.

· .· A declar~tion of bankruptcy or a· jud.icial Note:. These (No ... 14) credits shall ·have·.
liquidation-' ~mu~t be, present befcxe ,.workers' preferel")ce'amo,:ig them i~ the order-9f p'riority of
prefere·nce .. may· be enforced (Development the dates ·of the 'ii1strun1en'ts- · and of · the
Bank v. Santos, G.R>No. 78261~621 March·.8,. judgments ~ (DE LEON,
.
supra. at 671).' · . . -~ .
1989). . ' .
....
. . . - ·,
• _':o .... _:...."· ' • . The order,of preference is first, in·tavor.9f credits·
Rea.j;on: Without.judici~I proceedings·, it. would~ . evidenced by 9.fjnal judgrrrent (shquld.ttiey hav~
; t;>e· pu~ting. workers in a· better: positio.n that the been th·e .sub}ed of litigation), and secondly, in
State could only. asser:.t it;, prior preference.in a .. favor of 'credits' - evidenced by a' public.
judic:Lal proceedings .. (Development-Bank of the ..,..instrument, the preference among·. the two kinds
Philippines ·v . :NLRC, G:R. .· Nos., 82763-64, -.--· o(credits being determined by priority o_f dates
March 1'9, 1990). . ,·· · , ·''(Rizal Surety ·and lnsuran<;:e Go: v:De/a Pa.z,
G.R. Nb.---L;6463,- McJ}'·26,_.1Q54);~- - · 1 .:

2. Funeral.expenses for .the._debtp.r, or his children . ~<

ur:ider paren_tal authority· wh9 have--i10 'owh ·Statut.piy. PreferE!nce NOT' "Applicable' to ,the
property, upon. court approv9l; · . · Gove'rnmenf. · · · · . · "'· · ,.. ·
. .. . ,· :
.. Art. 2244, particularly Pa~ .. ~14)(a) t~-;:;reof, is 'not .
3 .. E?(pemses quring the last ilines~ oJ d~btor·or of · applicable·:to obligatfons of· the· St_ate·:·as 'if i~,a
his/her spou~e .c;ind children un.de.r parental . ·:,recognized doctrine that. the St~te is alWc:!YS solve,:it
. authority',.if tliey.·hav_~ no own property;:·· · ·· (Araneta v: Hori. Gatmai(an; :G:R.· Nos, L-8895 and
. - . . . .. . -.~.. . . '. L-9191-; April 30, 1957).' .. . '1
··:!'-
4. · Compensation . due ·the. laborers or · their
· .' dep.e,nde.nts.uhder·laws proviqing for' indemnitYr; N,ote';. Tn~·6'rder 'of preference 'in Article ;244 of tnd
.. -Civ] Code is )Jery.importarit.. The order_ofpreference
ese. howevsr, -does _not -reter to specific 'real or
'persohal _prcwerty: -'. It .refers ·to other property (5
· at 1_387): .. _ .·
7:PA:RA~'.sirf

·T~'ird C~~e_g~~\Gom~ci,:i·~r~edits: ·. :· ''. . .

· Ar:,y: :other. clarms. ·or., credits' other- -than those .
· : rtrnntio}l~ct in(Arti~ es ?f 41, 2242' and ?244: o~- 'the ·
7. Fines and civil ·. indemrilf~~ti~,n~ ca1isi~g from : · · . Civil ·~ae. i::~er.e is;io order of-preference 'amonq · .
. criminal offense; . · :i- , •• • • common. cr.filillors. They share what.evec-,is·;,left in

·
' : · . · . ·· ·
8. l:.eg~l-~x~~ri'ses and 'ex~e~~es incurreti:h·t~e
. ~ .proportien to "tfieir_'.G(edit, 'reqardless ·o.f date. (CIVIL

.. ·ya· l-~d_a__ drninist~aticin·. of the. i~~-ol~~nft:./.

·CODE,:_A~ ..
·e_s,.:tate; ·
2j. . . .
. _., _ . , .
=»:. .-

~ . -~-......,No~e: Ordihary Preferred arid· Common ·Credits .

~:. _taxes 'ari,<:l., )ssessmen_ts/ -due tli(. natiqn'al ' 'cover ci,nly'"free property" of' the debtor, or, those riof '
. goverijmenr· other- them those menti0ned in ·. . subjectedto Special Preferred Credit.." ", · · . . . :
', ·.A~icl~s22411(1)_anq_2242(1)of·the-<;;~f.Gode; .. ·.- ·,':,:, r: ·'".. .• - . .. ·, . .' i .•. • ·.r, ,
: Natureof.Claims-or C.red_its .in, Ar:ticl,e~.~241 -and" · ··
· 10, .Taxes and assessments _due,anyprovit:ice(o°iher . _ .. }242 of. the Clvll Code (Spf?cfal.P/e.~e'rre~- Credits), ..
. . . 'than .jhose- referred'. to in Arts .. 224·1 (1) a Ad ,J • !1' ... .Articles 2241 and 2242' of the Civil.Code shall be ·
. , . 2242(1) of the Civil Code, , -, · -r ,--,' . . ·.·.. . . . .· 'consid~red ·mortgages1or pledg·~~--ef(-P.er'son_ai .' a$
. . .. . ...: . -~ . . .. . _>-.. ·... · . . . . .. . . . . . ~ i ,.- · and real_ prope'rty... :~. ·: · · ~1
· . · .. 11. Tax·es.'· and ·.__ assess·ments · due any ; city or.'-,
. . . municipality' 9th-~r · thah·_·; those.· indicaJed -·in. ·., · Not~:·.1n ·case of insolvency of ttie. debtor, such
. Articles. 4-241 (1) and 2242(1) of the <:;ivfl Code;· . .·claims. or credits: shall. be, cbrisider~d · as-liens.
· ·. ,:·· . . . ,· • , :·" . ·.· ·· · . . ·, f-i~·n_ce,. they -·i:!re '.r:1ot inciwd.ed in· th~- ·in:s~lvent
12: Damages f9r, tjeath pr physi<;:ai. injuries caused r .• .. ,e:l~btor's_ assets'(Pli: l,.EQN, suj:ira fl( 659).' . '
. , .b(q.u:asi-delict;.-· .· .· . · ... · .,, . .,, . ., . ., . . . ,. .. .- :· ..
.. .. · · . . , 'f\i;;: lien·s,' they are ·consi<;iered'. Gharges., l)nless
13:•Gifts due. ·fo .'charitable public,· and. private·· '·otherwise:.st~ted;·they are not po~se~sory liens
· · in~titutloni.; and with ·the· right of ret~ntion ·.(5 .PJ?,RAS,'-~upra· at
. ,.•,. . .·· 1~80) .
. _14, Credits· which, .wi;hout·.special ·p~ivil~~e-. a:ppear · .:
~n. (a) a P.~blic ·iristr~rrient; · or (b) in · a ,final 2: A~ides .. 2241 and 2242 · .only find ··application
Judgment, 1f they have been the subject of wheri ther,e is concurrence of credits (DE LEON; · ·
litigation.· supra at 659). · ' ' .. :· '-,' · · '

. ·' . . . . . . . .
2019 SAN BEDA LAW CENTRAIJZED BAR OPERATIONS I 709.·
 - C:REDl,T TRA.NS.ACTrONS
SAN BEDA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID 2019
. , ..~.}\I~~ ett~?A. #\· S!?ti\H 3 '."ust
*%kff!!»%,tffi? iiiP#.£SW: ·x;w. fi'/ 14j¥£?fc!¥r #i, 2Xi¥f!514d#t SM .. •e;w• ,@£ ·:ai!&if!:!!41,'!t@fi Y

3. With the e:><;ception of the. taxes due to the State ·credits to the ·extent·of the value ofthe movable
(No·._ .1 ),.Articles 2241 · and 2242· of the Civil Code _lo which preference refers. . ' .
merely el')umerate .the · pr!:)ferred: claims on
specific properties. They do not.give the order of. Pay No. 1 credit in ·Art. 224 :r of -the Civil Code,
·preference or priority o.f p9ym~rit (Id. a_t 659)". ·. · and. if two or more credits· in Art . .224-1 conc.ur;
. .. apply proceeds bf.sale pfo-rata, (pari passu) to
Nature of Claims or Credits InArticle 2244 of the . the cre_dits applying Arts. 2246 and 2_247 ·of the·
Civil Code (Ordinary Preferred Credits) Civil Gode. ·
In contrast with Articles-2-241. and ·2242 of the "Civil
. Cod~. Article 2244- creates. no liens on -determinate 2. For'" immovables and · real: righ.ts - Sell
property. which follow such -property, What Artlcle . immovable . an.d real right and determine_ · if
2244-creates 'are simply· rights 'ln favor of certain proceeds of sale are sufficient to cover. the.
creditors· to have. the cash and- other assets of the special preferred credits in. Art. 2242 of _the Civil
insolvent applied. in a certain .sequence. or 'order of Code. ; · · <
priority (Republic-v. Peta/ta, G:R,-No, L-5.6568, May
20, 1987): · · Exclude ail · other, credits: to the. extent of the
._ _ vafue • 6f immovables" arid real dgtits to which ·
Two-Tier Order of Breference

u ·]·v
, ' .. preference refers: · '·.
1., _First tier - includes.only taxes, duties and_~· . · ·· · .. · . . -. . . ·:- · ._.
_due on a specific .. ,mov9bl_e or- ~ova9le P~y: No. 1 !n Art. 2~4~ of_the C1v1I Code.ff two_~.r
property; and .··. _ /~ I\,. . mpr8,:cred1ts mentioned: m Art. 22~2 pf the C1v1I ·
2. Second ~ier·- All oth::r specia,I pre~r~1d..t:""~.- 1
.Cod jP.n?,ur.; _apply pro?~ed~ o_f:sa~e pro ra.ta,.
tax) credits. Th_ese credits w~Je _o~;..atisf1ed · · 1pan,passu). to-·th~ _cre~1ts_ applying /\rt~. ·2248
pari pessu ;:md.pro rata, out ofa~s1i:1.1:1~v.alue~ .::l:. . ""_-.and 224~°iPf t e C1v1I Code. _ .
of-.the specific _pr9perty t~,e_hic.11f{u~h· oth~~ ·-;; ~r- \," . : , · · · . : .. · .. · _ :
1
credits relate,(Republic-vf Pera/lit,. G.f R:No. ·Ii- ~ .Step 5: \" · . .: · _· . ·

· '· ~ · 2 i·
. ~ ,
56568, May 20, 1987) .. ,· ·. . 1 _ ,'.,.
iV\ 1 .. If proceedsA·~1e~frQm specific· movable.and
immovable are insufficient, the balance-of said
Note: Pro_ reie rul~ :dots ~Qt ~·pply. ~o. ".c~~.ditS'/~ f!'.I C"'.,,4~P~<jial p~e$~-- ·cr~dits become . ordin~ry . :
a~n9_t~ted m t~e Reg_1stry~~op_erty m~,rt~e<o!~if4~-" preferred . cre01ts7neer Art. 2244 ~f the c,v,I_ ·
a J~_d1.~1~I order, _by.~tt~crrnefl! an(~~l;~_!1q?.~:~1--t.::
which _.are. preferred , onl¥.-a5t_ to la~~~ecITts
(Mana bat .. v.-· Laguna_ F~ot}afi_o~· o(''l,:"af\o'Tnas!~I"
Im · ),f\ ·
lw"::-
~o.J ,VJ
t;(,Yf:.:5.
It· r9,ee·e_d¥ of
1 · '. J .. ::.
-~
~W
. ·. : . : ." ·
• _- : .· .. , . - · .-.:· ·
frOll] ~p~c1f1c movable_ -and
· Inc.,' G.~: No., t~23888,· March: 18 .1 ~l?t~J)· 1r'· ~ '- ~ipov9~tes· exceed tt)eqotal spe~~al. preferred
.- . · ~ , · ·-, · · :\·· •· -·: .· ,. ' . _qedj_ts1,(tt:iere·- i/.. exc_e.s~~ in' .. :proqeeps)! ..-such·
St_ep~ in·. Applyi.ng_ th_e1 Ruh:!s_ ml;Prefer~nce....c@e_'[l.:.'~ .1'""1\he~cj.-5:?be~OJJl~-P..arfof the._fr_~.e-pj-o~e~y.o_f,_the ·.
Cpncurrence~of Credits - · ~: 1 · ~~~-~or~Jo.,..~dd~d.to oJh_er.asse.!s. m ord~r _t9
' .- . '· .. ' .· .... ,·: . . ·. ...('_:Qv,,-~· s,9~s~1h~ord1riar;y'f:)refe.rrec;J?cred1ts:u.!:Jder ~'1-·.
Step 1 :_ . :·. - .. : . _. · · , .
. i;:>eterm,ne . first. 1f . 1t.al;J11it1es.: ex_cee,d the .. s~s- · .. · f1..
· .. .J_ . M .i\~2g5.~ofl{~e ~ivil Cod~·iaBd'..th~~-:the ·common
,...;.9red1ts under, A~-.22:4? of-t_h_e·_C1v1I ~ode . .
'-

Categorize,oth.e, -credit~. _-:into the fQllowing( three-. · : ·, · ·

categories:· · , ··· ·... . . .. ,. . ..: · ;: . · . · Step _6: · . :·· . _;_ · -..
L SpecialPreferr~d 6re.dris in 'Art. ,2241 and.2242;° With the eicess· ca·sh _s_ale of- ~ssefa: COVE;i°re.d irr Art:
2: . Ordin·ary P.refe/red Credits: uncler.Art.-·2244; 2~41 and 2242 .of tlie_.Civil Code(,if:any; sell .otber
3: Common c(edits t,mder_Art, '224~. -.. assets of debtor an~ si3tj~fy th!:). ·o.rdi~ary pJeferred,·· _ · '
. credjts · by -applyin·g_ proce-!;lds. of s~,le' in acc_orda~~·e.
·step-2:· ·· _ .. · ... , · -. ·. with ·the'_or9er· of prefereri'ce of c·redits-·es_tablishe·d in
· Determfrie 'or niake an ··inventory" of'the assets or Art. 2244 9f the C)vil Code_ (Cl.VIL, CODE, ~rt_: 225-1,
properties~ofihe-in~olve_n~.deb_tor:. ' . ~- :._ ... - Par.. 1). Rule on.preference appli~s ... · . ·. ·.. ·
.... , : . . .
'. . . ....
Step 3;- . -. Step 7: . : · · .
Seg'regate spedfic : im.mo~abies·. -a'nd/or: niovables- ·. . After applying the _pr_oceeds ofci°al_e ,of all p.roperties:
mentibried: under Arts":":224 f -and. 224Q or the ·civil under Step 6.- i,ipply any balance' ofth·e proce~ds of
Code,.~ . r:espectively
. . . .
.. ·· · · · . . . , · .the··sale. to common credits· ir{ ,'i"ccordahce with the
rule pr9~ided iri Art 22q1 .c:if .the ·civil Cod·e. ·R'ufe on
Ste·p.4: . . .. concurren~.e ~ppfr~s:; thcey: ':~re· . 'paid" :-.pro- . rata
1.. ·s_eil ·m~"'.ables and_deterrni.ne i'f.-th~,proceeds a"re· r~g~rdless ofdates (CIVIL: OODE;;Art. 2251; _Par. 2).
sufficient to·.cover tne: sp~ial pref~rrea credjt •in .~
. Art. 2241 of the-.Civil -Cside; exclude· all :9ther ..

. '
710 2~}9 SAN BEDA LAW CENTRALIZED BAR OPERATIGNS·
'.
 CR.ED.IT.TR:ANSA:CTIONS
SAN BWA LAW CENTRALIZED BAR OPERATIONS - MEMf)RY ~,o· 2oi9

Illustration: ·

2,ooq,000
Receivables· 2,000,000·-
. Exc~ss . · on 1,00:0.000·
Immovable Property House and Lot

.
:Rou.se'.and
I.
Lot c 3,000,000
Movable Properties
Mercedes-Benz 3,000,.900 Fr~e froperties 5,000,000: ··
Cash 2,000,ooq Unpaid wages (1 .ooo.oooi Pd:, Bal. of
.. ::;, .
. . 4,000.000 ·'
Receivables · 2,000,000 . :

. . ;
Fjmeral. · (\ooo,boo) _.~, Pd., i3~i: of
,,·. Total . . of ... assets
. value-
~.
10,000,000 ·
expenses · 3!qoo,oqo
. . · Unpaid income .(1,000,000) · Pd.
tax.

Unpaid purchase price on 2,000,000 : . . . : .>, ·2,000,900 . . Bal;

-,
theMercedez-Benz ·..

Unpaid wages of Laborers 1,000,000

Unpaid duties on car- ·· ·
Funeral: expenses · of ' ·
deceased. child
Unpaid income.tax ·· 1,.QOO,.QOO . 1/3 x 2,000,000.
.r =P.666.~~6.67
Unsecured credits of X
and Y. (~1,000,000 each)
Total
'. - valueof liabilities
.:
.. , ...
Sale 6fAssets in. Liquidation '
..... The liguida~or may the UN.ENCUMB~RED s~II
·. assets of the-debtor and convert the same 'into
money:(R·.·A: 1°9.142/sec. J~1) . .-· · ··'
House and. L~t . . ·: 3,000,000 : :i·
General' Ruie:'.The saJe must be ·m;d~ in~~ p~blic
· · Real . Estate. (2,00~,000) · Paid (Pd.) . .'
Taxes
-- / auction.· ·· : ·. ·. ,. . . · '.

1,000~000 I sa1~m.c~ (~al.). Exception: 1,\-private ..sale .rnay be allowed with··

. approval of court. if:_ . · · .. . ·
Add to Free . -1. The goods'to be.sold areofa perishable nature;
Properties ·or . quickly deteriorate . in ' .. value, or
Movable disproportionately expensive !o · keep or

Mercedes-Benz' '3,000,000
... ·r:naintain; or · · · ·. ·. · _.. · · · · ·· · ·
2. · The private sale is for the best interest of the .
.
. . .
. Unpaid duties =. ·(2,.000,000) · pd·:. B·al. of ·. · 'debtor' and -the creditors · (R.A. 19142), Sec.
-. .1;000,000 :'.'1.31) .. -, .. ".' ,,i .. •

. • ! ·:, .,.. -

Unpaid . · (2,0~0,-?0_0) . 'Pd. · ··settir:ig-off arid Nettinq · urider the FRIA ' ·
purchase price If the debtor .and creditor . are mutually-debtor and
(1,000,000) Bal, .: : creditor of each . other one debt shall be set off
: . ··against the other, and only the.balance, if any shall-
Add to. be allowed in the liquidation. proceedinqs (R.A'
.. Common · 10142, Sec. 124)... .
Credits

. I . :,
aois SAN BEDA LAW CENTRALIZED. BAR OPERATIONS I. 711
 CREDIT-TRANSACT·IQN·s· .
SAN BE,DA LAW CENTR_ALIZED'BAR OPERATIONS -'MEMOR~ AID 2019·
%--i=4£®·eza:-:,•15@ ~;g.g:§b9:?P's?Mt~&RMRS&ii * Srltiiidf&!l·P... 2i!dfitB.~!#..£»Afi'li-lf?WW!Rf:#tW.t,f:·~1

',
..' ,_ ·• good faith: No such. good faith exist if the security
:,
PERSONAL PROPERTY.-' interest·ih the mqvable property-was registered pri_or
-sicuR1_tY:Ac:r · .. to bis-Qbtajninii:t~e
. . . .
p'roperty
~· ~ . (R.A.. 110f?7, Se~.,'21):
. .
(R.A: 11~57) P.roc~e.ds . . . ., . ,
Any property- ·received upon s~le, lease _or .. other.
Effectivity o'f the PPSA . ·. . .
. .
disposition-of collateral,. pr whatever is collected-on
or distrit:)uted 'Nith respect-Jo .the cb!lateral, cl§lims
RA 11057 was passed bn August 17 ,· 2018 and ;:irising out of the loss or damage tci the coll.~teral, as
took .·effect on September 7, 2'018. HoweveJ, t~e weir .as·· right ~a· . insurance paymen.t or- . other
imp)~me,nta~!Orl Qf· ihe PP~A .. sh~II. ?e·. cqnditi.qg_.~,d_ ... compensation_ for.loss or qamag~ of'the_collateral
.up-on the establishment and oreration of the registry·· ··. -(R:A. 11057, Sec. 3, Par. f}, .. ..
(R.A: 11057: Sec._.68). · · · ·
'Perfedicin- in Pra"c·eeds· . . .
. Scope of the PPS~ . . . - · 1 . Proceeds" in th&-fbrm·' of money,·· accounts
, This. act' s,hall appl~. to }ii tr~nsa~tions o'f any form · . rec;:~,iv~IEl: ._peQO!!?~li~ _ln?!';:~.rn~_nt~. o~· ~~-posit ..
that secure an obliqation with movable C<?l.\atE::Sc!I,. . -. . .accourits :... ·a:secunty interest. shall e?(tend;·to ..
· · : . pro'c~e1is· ~f'ih'e tl;)l!~.t¢r~yw)th_cici_t.f?rth'fr a'ct afl

-~u
~·xc~p_t ifitere:ists i~.aircr~ft~-.s.ubject.~o ~.A. 9497.-.and ·
interests\in ships subj~d to 1?.p,
152l(R.A. 1.1p57~ _ ·. ·, .be tc:iri_ti):iu~~sly p~rfected_; ·· . .
Sec. 4). - · · :. '2·. - Proce~d~ If) . a form different from; money,
. . ; . .r .-r.~T\.. . . t . J :
i\'lad'counts. receivable, negotiabJe. instru'l)l_eots qr
PPSA. repealed. the laws- on ~.onve.'J!ll?[la.lf If_~~s~- _ J.. 'V_ dpp9!it ·~<souhts~ . th'e, se·curity- interest IA :SLJCh
. and r chattel mortgage, an'?;- .. _,~ac_ef~~ a .. " . . · prci.cJ(cl~s~ ·_oe:, perfectf1.-d:; by __ one of the ·
_ct,ons_,){Ji?:~ .. 1. ~~-'....:=. ,:f . - --..means-:Q_p:-8P.li~?bl~ · -to ··th.~.· -r~I~- vc:int. tYP~. of_
framew,~r~ ·for"sec~reu· .tranfa-
· Sec -. 66):' · ., _ . ; :
.· · : ·, · · : · . · · ·
. J . ' ¥.. :f:h ! •
·· ~ . · · -:
r· <1P1 •.Jt'
w· c;oar~a(~1t!Jjn .flfteen (1;i) days .. _qf.~e~ . the
~
graJtonee~ives·su~_ti _pr~.<::~~~s; otherwise, the,
Security ln~er~~J ·. · > , . . ··-~;,
11 _.·1 secil ity inte~t)~ _such ~roce~~:·shall not. be
oth_~! pei:formanc~ of- a_ri ot_»Q~or_; re~J.~f~l~~L::., 'j'.!: -~ '14): /..
w~et~_ef. t~e parties bay~ aepO_ijP._ma~~~_,\i! ·.~s&,a/ r!;; ·Ir' , . ·. ~
. \ . , .
> · ·
. . • ,. .
_
.
. .·
·, (R.A. 110.q7, ~e~: 3 U)). :·'
. ·.. . '. .. · , . ,,
~i-(f):
se:curi~finte're.:3t,_an~. ~.eg;,i_rd es~the_t~yi~1~f
\ ·· .
.. '\'
qSS~t~~lf0:o,bj~ctsf[r;;,t)le.i1:'.SA
_ ....
.· •,. · £
ff;F. t·ff:1-- _ ~6ci}Y.1:~ter-~s.t (1!;.~.---_.110:57, 'Sec.. 3 (b)(1})' -,
~ ~··. ~ ~{&f'.~~-qd1~~C9n!FcftS (~.~.9~.·~.(~},(~l},. . . . · ,
... .'' · .•

~- s~Gurity _mteres.t: -1s er l!ed e~/,a Jf: .C!l.~{g)~-. \1{,<~a~e ot;.o.od~_(Jec. 3 (.C)'(~)) .. ;.
agreement,-under wh1c~ the.d~~t.?r. gr~u,ts .~sec11~. , :~~~lJl)Js R~c~i~~~.1.~. (?~'?-},Ci)}.;_ :"'- ~ :.:· ..• , :- .
. intere:>t· in Jhe _a_ebt?rs·:·p~?P~rty-.;asf.G.cilta~~ra¥o8 . - ?-~1t:eiguiprr.J~.~t .. (~f~--!J_;:·. · .:· : ·. ·. :_/' ·;.,_:, ·,.,
.1o<?f1·or other ol51Jgat1on (R.A..11Q5z~e·~j,(~~~llfo~v~n~~fSec.7); · · ·.• >-.-.·· ··.· ... .' '. .' ..
. ,. ·· -- ·. · - _· . -~-~ ./·f}(.{)~7~epo~it.Ae9ount (s'~c. B (b)),: . ' · ·.• · _ .
Characteri_?tiss of Se~urit~ ln~~-r~~t. ~GAF~ Z. M. t\11r\~¥r;ri~f p~o:p~(tf(~~<?·., 12); · . · . -: , . · ..... :
_ 1, ~o~s_en~ual .c?~t~?_c.t_-}t,.always·.ar~s~~~-the ·. · .(;~~ ~e·gtti_abl.e.ln}'tfµrri_e~ts _(Sec. 11(a)):" - . . · ..
. me.etmg·,·of. Hie min.El~· ot_-the .. g~antor:. _ancr.i:tb~edutity ·certificate ($.ec.d $(a)); · ."i · · . · .. ·
·.secµred ci:_edi,t~r;_.~-'. .·, :'. ~ . . <·,-: .... ·,:.,.--.,:'.. . 11 ... Ele~tr0nif; Se~urities:(s~c;.18'(tJj; . . . , -< :: ,.
2. ·· ~cc,·e_ss~gry. Qbh9at1on- bec~u.qe it CaJ)n9f·exist . . . :1:2. Co·nsum·ecgoods;(Sec/23(6))·:· / , .... . . .'
: \..W!tholJt ava,lid;princlpaLQblJgatio_n;_ .... ··, ·,.') :' \ . 13:'-lntellectLfai·pr,9perti($e,c:23(c)J; .· ·. /· . ·, ... ·
3. ~or.mal - reg[~tration.}.~ Yegis_try·is 11eces_s~rym ·. . 1.4. pv_estQ_~k(Sec. 24j;. ·.: -. · · . · . ' ... , . . ~·
·",:brder to.bind thi'rd·.per~bnS,;<· · .' ... ' ··: ... • ·,_'.-:, · · _ · · 15: Fixtur.es· ·. accession·s· anch commingled ·goods :
4 .. -!!~ilatfiiral contract:·~ OrJl/t?.·e cr~di~?f.:is ~~li~e~
to_:. 'pe'rform ·by· d1sch.arging,··.tne ._hen·. l!ppn. · .. ·..
• '. ~-- (-Se~... ;hs). , . '·- ..... · . -~
.._ '- ·. . .
> · ' ./-. ·. :.,
" . ··. ~ :· . .;
. "fulfiilmentof.the pri_risip.a_l obliga(icm .• : . ,- : · .·. ; ~-.. .. ·A security agr~~m:ent'.may.,p,r:ov.i9e)o~ ttw c_r~aJ_ii:m o(,
· · · ~· · ·~: · - · .. · · ·· . . . ~r se.cutity: ii:itere:~t. Jn. c! ·. future ·property,' ~ot · the .
ExtenF .. ' .. _ . ' . - · . ·. · . secµrity inte'rest iQ that pfpp~rty is cre~Hed on!Y'W~~n-
. Secur\ty · interest , . cpn,tir:i1,1es, · .. [ri: , qolJa.t~ral th~ 1~·~rart~( acg~i~.e~::·righ't(~·~· i(.or:.-.th~. ~~w~i"/Oc ,.
. liQMithstandir)g sale., lease/excl;Jange,: or <?tt,er encumber·1t. (R_.~. 11Q51; .. Sec; 5 'f'ar.·b). ;-~ '.
disppsition/of 'ttie .:ccillater.?I .. :-~ncj :·e?(ten_ds · to its__ .. .· · · ·
ic;lentiriable' pr'-trace~ble pr,o~ee.ds. (R.A. 1'1~57; :Ser . . Form· : . . . ,. . . . . . . ,.
9) · · . ' · · . - . · ·· · ... ·. ' · '. _· .· A security. agreementni.ust pe 'Contained\n a written
'. · ' ' confraGt $igned by'the parties'.. It i'ylay consist .oto:nei
Ex~'e'ption.: ·Any barty wtio ~btaj,~s::J~. ttie· or~i~c;irYi·. . 6r 'mcfre. wffting~. that, taken .toge~ber,, es\ab1i.sh the
- course. of ··business, :any movable · pr.61:)erty - i~terit cif.ttietparties to cr~ateasecl'.Jrity' inter.est (R.A.
c~:int?°if)ing_ a S~~urity,· inf~f8S~ ~ha,11_" ta~E(the· Si:]me. 110,5-f, :Sec:: 6). . ' ' .
free of.such securi_ty in't~r_est p~c;,vicle·d he. was ·in ·

. .
712 2019 SAN SEDA LAW GENTRALIZED·BAROPERATIONS.
. \
 A description of the collateral shall be considered 3. Perfection by Control
sufficient, whether it 'is specific or general. if it Control of the security interest.- is . perfected
reasonably identifies. the collateral. (RA .. 110.57, ·_ · automatically if 'the depo_sit taking· Institution or
Sec: 7) · -c- -, the intermediar:y ·. fs '. the secured · creditor .
. Otherwise, a control agreeme'nt or'.notation· of
Perfection of Security [nterest . the. security interest is necessary (R.A. 11057,
A 'security interest .shatl be: perfected when it has· Sec.-13). ·
been created and the secured creditor has taken-one
of thefollowinqactions (R.A. 11'057, Sec . .-'11): · . Assignment of Security Interest
-1, -, Registration. of a notice with the Registry (Sec. If a secured creditor assigns a perfected security.
. 12;-Par'. a); - · . · . if']tere$t, an amencfmeht notice.may be registere'd_to
2. Possession of the- collateral· by the, secured renect the assignment (R.A. 11057, Sec.' 16).
creditor (Sec. 12, Par. b); · · ··
-3. ,Cor-i'troi'· of investment- property anc deposit The Regi_stry . . . .
-.', account [Sec: 12;· Par. c). '/ ."" . The Registry shall: pmvide electronic .means for
. . . ... . .
. . ,\ r'egistiation an.d searching of notices (R.A. 11057,
On perfection, a security· interest becomes effective • Sec. 26, Par: 8). ·
aqainstthird parties (9ec. 11 ). . . .
-lnf~rmation .· contained in the.: registry shall be
A security i~terest in any ta~gible asset mJy be . . considered as' a. public ;re{cord .. The: electrO:nic.
perfected by- regi_stration or-possession .. A security . rec9rds of the -Registry· shall be the· official records
interest in investment- property anddeposlt account ·, "(R.A. 11057, Sec. 27). ..- . ; .. ·:
may be perfected by registration or. control (R.f.\.
11057.,. S$CS. H _& 1-~)- .. · ·.. ~ .: , ; .. ·. :_Regi_~lration · contributes to the effici_ent· ...
.&

estal:llishment of. a sy?tem of priority ·security

interests, by' aJ?plying priority rules.based 00,:the tirne
of registr<;1tibn. · · · ·
- ·. . •.
_' Notice~,. , .
. ,.'\ . The. . dutie:{ of. the' -Registry -shall' 1be-- .- fT1erely
·. -·:c·
. ( . , • . administrative in -nature. ·s'y; 're-gistei'ing, a ·notice or
refusing o reg1s er a.notice, th.er Registry,:does not
determine the sufficiency., correctne.s~;-.authenticity,
or validity of any fnformatiqrkontained'in'.the.notice
. · B/ possession
.
·.. . · •· ..
. ·:... - (R.A:.11057, Sec. ~5, Par.~- . · .
·~· . ) ; . . ·.. .. .. ·,. ·~ , . . ~. .. . . ~-:-,
-:' ·-
By Control Priority ..Rules . . , .. , .
· The' priority .. of security··interests· and . liens ih · the
......... ··. '\ . safT)e collateral ·shall ·.Qe determined acc:;prding'·to ·
..
7
•· 1·-, : . Pe~eitib~ by'Re~i-st;~i'ti6h. . -~:- a
' time 'of_~egistratiori of n9tic_e cir.. per:fe~_tion· by other.
means, without regard lo·the ·order of creation ·ot the ·:.
,. A ~ecwity.Lnterest.i_n_ 1.) atanqlblernovable asset.·
; . . ' 'such .c!s··m:otpf VE;,fi'ic!e, ~>'
i_r:ivest.m,enfpt~pe~fy;- .. ·
security ir.iter.ests_~nd,lieos
I . - ··.'
(R.A:::1-1057, Sec. ~7)
. . '.
'.
• . : : .s.~c~ as ~e.~Uifite~. ~) a_ deposit a'G.C:_R~~rit such as .
.:.· P'riorits, for Perfection _by·Control-· '·· ,.,
· -: . , ~<:IV}ngt_ .~c.cq~n! .. m~y ~e_·· .. P~rf'.ecte.P,_ qy
·1. A security iriterest .in a.-·deposit account with
·· reg1~J~t1_o~_Q(the se?urity lnt~re'st in !fig re~i.stry. ·
· · ·. resp$c:'t· tti which · the -s.ecure c~editor · is the
)-'~OQ:registrati~Jn :dbes' ·.IJO.t aff~c( il'rimediate :: . ·_. . .. depos\t~taking instiiu_tio'n or . 'th~:, intermediary
'parties (Filipir,a~.Marbie·:corp. v, /AC, G.R. No. · · • ·-shall' h'ave priority ayer·' a competing- secu'rity
· ~ [;6801Q:_Maf_ 30, t'986J., _· -·. ._ :·:\ _: •.. . · int~rest perfecte_d by-pny method., . _ . . .
0A
""'\ . . ·. . .
'2. security- ·interest in ··a deposit ·account .or· .
·. 2 . . -p~_rfection:by· Pdsse·s~i-on . ·. .1. i_n\estment _property 'that' is .:per:fectecj a by.
. A • s,e§urity inter.est ni'ay ·:~~ perfected. by control_.'.~greell')en.f shall have a· priority oyer a
. 'possession.whfcft Is ho1c:1lng o't=t_he._instrument: com·peting. ·security. interest of' dep6sit-takfng .
., · ir:istitution· or the jntermediary. · .·· ·
.. . . .. :_ . .- ·_ .. . . ....... .
Under the.Civi] Code, po?s,es·sion .was essential 3. · The orqer of pri~rity among competing security
.. for~ I_h~ cr'e'$,t1pr, · 'pt a.
)e:.cu_rity . in· P,er~onal
..
interests in a:· d.eposit a<;:counl':-or investment
property'.that were perf~d.ed:by th_e:cciriclusion .
: ;Pf~per'1y: Und_er tQe ·_ppsA, posses~ion is.• only
. · . · requir~d for third party effecuvene·ss. · . of control .agreements shall '·be determined on .
. the basis of the tin,e of conclusion or'the control
·agreements. · · ·

2019 SAN SEDA LAW CENTRALIZED BAR OPERATIONS-, 713

 CREDIT: TRAN.SACTIONS
SAN'BEOA LAW CENTRALIZED BAR OPERATIONS - MEMORY AID ·2019
.rnrssew;;wqm w;:ti;:@st & & ~ 1w ut• :tsw e @< .. at e,n . :.;1t:-:i.:fin a ¥# .ffi1t@4s s;nse *, \ @'~Xii t::•z;c q;;:&P=ttA,&9, ¥i I
4. Any r:ights to set-off that. the deposit-taking 2. · ~lth judicial.process .
. institution may have against a qrantor'sriqhtto . If u'pon default, the,secur_ed creditor.cannot take
payment of funds credited to a deposit account .. pb$Session ·.of the. collateral without br~·ach of
shall have a priority over a security interest-in the p~ac~. !_he secured creditor: . ·
... deposit account.. . . . '.
5. A security interest ln a security certificate a. Snail .be entitled to an. 'expedited hearing
.perfected 'by the secured creditor's possession upon application for the· possession of. the
ot. the certificate shall have ·priority· over a· - . · .collateral; .:
: competing - security interest perfected by . b. Provided the debtor; grantor,· and if the
reqistration ofa notice in the-Registry. · , collateral· is a fixture,· any, real.. estate
. 6. A 'security interest ·ir:i. electronic .securities not rnortqaqee, .. a · copy of the· 'application,
held .yhh an intermediary perfected by a notation . including all' .supportinq evidence and
of the security interests in 'ftie books maintained documents; . . . .
for that purpose by or on behalf of'.the issuer c. _ Is entitle,d to an orae(gra.nting possession of
a
shall have priority 'over security interestin the - the collateral upon the court' finding that a
same securities perfected by any other method: default has .occurred under the security
7 .. A security inter~st _ in· .electroriic securities not aqreernent. -
.helo .with -an Intermediary perfected by the. . . .

· secudti~~ perfected by registratio.},_oftt'noti~i~

u: .fQ/
'.
conclusion of a. control' agreement· shall have .. . . . ~es'sor of the collateral refuses to yield
priority_ over a security _interest in the~sa'ii;'"e go.~.session:. -. _ '. . .. ..

the R_\:ltJ1stry. . ·
- 8. The order of priority-among co~ple®,9ie~urity.. : ,
~ , /'-. ~ (_~ . . . ._i, njo~gee has th: riqht to m_~intain:
£in_act10..n. 0 recover possession: or
. 2: RecJ/er )>~~~pleviri the -collateral from-the
. . .
· · 1

~n~erests· i~ e'lectro.nic-sJ~cu~iti~s n~jlclJ.{J.l~·an:" ,.s'=, ~~gag'@,,f-bbrr' ro.m ,<i11'.lY 'person · in··. P.b$ses~ion
.iritermediary ·. P,erfec!e_d_ bJ''A!l:~fc0nclu.s1.on \lb
1.._~ w (R.'A\. 11{5l', ~ec: -4~)..
control aqreernents 1~· ae;e.rmin·e..{on the; ~:as1s ~ J'.1\.\·_ · ·. • .· -~: : \-, ... _ _ . ·. · .' . • ...
of the. ti.me of C?rJt~usion 9.t th. ··. control f'V"°' Enforce!T!e,:it·.er~s\of .Securj_ty lf'!teresf ,
agree_~~nts (R.A. 1'-105,, _'sect,8). · . _ ~, - :ii ~ryrg1est _ra~k~~~)u~e,d ~reditor ~r the c.r~di~or .
__ - ·· -_ · -- - ; ·N_ . -~--· !Ill ~4Rf'asec_unty: 1~.t~r~.stt ~h?t.·has th~ highest ~nor1ty
Enforcement of .Se.c~nty. l~terest . . .. · · ~q:zmn,O'Verot~•er ·se~u,1ty"'mj~{ests:, exercises_ th~ -~1~M ~f
. ·1Ji:,d- ~Hhe· f:'PSA, ·.at,sec:;urit$:it,e'e_ ~t~nforGed: - ""'enforle_ ~-e1t-
e.l}~er throUJgh re.2,ove,y, d1sposit1on, or
·, e.ithe~. by ._r:i::ciY:_ery, . disp.?sitiol)J'\or. ~1JJ10n.; · nirn J)f re~~ntio J.sec/: 46)~ I _ ·. · _· .
_cerj?;!f! ca~~~ •. the -~-~cured :cre<i/itor'°'-sl~~se~~
repossess.ion ,of ttie collatera,._. _. .
~-l~r-zti;:l - . . , f:- . . · , '1
_ o) . . · . - !!,~~:dle.s,not Ji{oh1b1t ·those· i,v1.t~)?werpnon.ty:
.· · : .· ·
0

_- .. - - _ · . _-. - .. - r ,· ·. · - _ · . : · . - t0~~1'!11T1~ee 'enfo;9ement.. How~ver; .. t~e P.PSA ·

Repqs.session is a preljminary proce,ss Ina ni~~'r°'."l<.:rtr(~e~ne:righ_t- of'_fake ·oyer to .ttie high_er_ranlsing ·
- _ und~~aken by i3 secured.c'reditpr s~kin~Jo.e~'e.'...£.!..1..!s~e{a·~rtqi,t.bV. ·, · . . ,
its· secu.rity interes1,'- It mat_.be un·ae air~ittiout~ \\~\..0 ·\ .. . · . ,. · - .
· judicial prcicess~ot,wjth.judkial process .. ·
• •• • "'\··· :". •• • ••• •
0•
"Uj.
_ • • • •
·M
lft~o¥e~n ~~ecial ~ases.-. :
..
.:< ·
Loon€.lotflrough 1ris.tr.u.ct1_or:i );>Y. ·the ~ecur~d · cred1to(
. ..
,1.: · Witl:foutJ!Jdicjc)I pr~ce~s · .- .. . with~.ut~j!:Jdiqial pro_cess '-'.- ~ _-:-·: _.. · · · '. .·. .·- ·,.. - .
. a.. lf,.ttie • _sec.wily a~r~e.rn~nt. ·~o· _ stipulates, ·. .1.: . lnsfruct}Q-~ -~c~pu.rt-de,qt~rJo. rri~k_e payment to ,
... prc)Vid,ed that· 'PQ.~~eS$iOh .. -can _be taken, ... ' th'e s,e~ut¢~ cre,e:!.itc>.r>~~d.~f-PIY:SUCn~~ayni,E:ritt~
without breach,of. i;ieace; . · ,~ _. the ·satisfactiorf of ~he. obligati<,'}[1 :secwed l;>y' the
.. : . :a) -_ • . ,. ' . . . se:Curily inter.~st after dedli.cting ,,the,:Securec;_j
t,,iot~·:: The' - breach: oL peac·e sb.a11.. , (r\c;:lude ·creditor'i rea{o.na.f>(e''collE?cti~ri'-.expe.ns·es; .... '.
_ ent!3riii'g_:thE:iPrivate re~i~erc.e;ofJh~ granter a
2 .. In i)egoti9ple ·ddcu,rnent tM13t Js p~rfected by''·
without p.ermissicih,'· resorting. to physical ·. JjOS?essi.on",' ·p(oceed :as }o. the . ri~gp~rable.,.,
-~iolence · , Of . it:i~imidation, .•. or.. ,IJeing do'cufoent br gobds'.·covered' by-,the negotiable·
§IC,t:Ompar:iietj by"a ic:jw· .enf,or.cement ofDcer. document; . '.· • ' • . I . ·'.·

wher:i taRing poss·ession or cor:if~onting the 3.' - In a depcisi! acc9ueft :nJ~,i(ltcJtn~tj by fh,e se~.ure~·-
.· gr_?r.itbr. _- .·.', .. : - .. >~ ":' . ~- : : - . ·-.. cred,i.tm .... ·~pp'ly ·.tn~···bal~r19.e_'~of. \1)'.~:· de,_p'q$it
0is _ a9ci?.ur:it:to the, o.~lig_i;i_tjon ~ect.ireq ·py t,t:ie c;_jepo$it
b .. · If - the· ~:ollateral. -a fixture:_ .the. ·_s·ecured accciun_t; and . . :.. . . . . . ' .
creditoi;';if it nas,-p'riority,ov~r.all .. aw·n'ers and .. 4. In othe.r cases of s~curity interes,t- in .a. d.eposit_
rn'ortgages·, m.ay re'mpve the·fixture_from tti~ a<;:courit p,erfe¢ied ·. "by'_' c;cinfr.ol, . instruct the .
. re~1· property to whiGh it is a.ffixed, pmv.ided ' d_ep9sit-ta~ir1g iiis.titytion. to -p-~y,.the halar')ce bf .
he.~).<ercises. dU\'l :care [Sec. 47f: . 'the dep9sh acCOUQt. tc{ the. s"e'c1,i'red creditor's
account (S.ec: -48) .. · ·

2018 SAN~EDAL.AW
. .
CENTRAll.ZED
. . BAR OPERATIONS
'
,!
 CREDl·T-TRANSACTIO-NS
SAN BEDA LAW ffNTRALIZED BAR OPERAT(ONS - MEf>:,ORY AID 2019 .

Disposition of the Collateral . . c. · The 'satisfaction. of obllqations secured by.

After· default, · a .. secured creditor . may sell or any subordinate security interestor .lien •in
otherwise, dispose · of the -, collateral,. publicly or- .. the collateral if·a written demand and proof
.privately, -in its present condition .or following any of the interest' " are · received · before·
commercially reasonable preparation or processing. . . . distribution of the proceeds is completed.
. . 2. The s.eclJred creditor shall account to·t11e grantor·
. The. secured· creditor may buy the.
collateral at: any for' any surplus, an.d,' unless .otherwise. agreed·,
publicdisposition, or at a private disposition, but only the debto_r is liabl~ for any. d~_fiqiency (Sec_. 52).' -
if thecollateral is ofa.kind that is costornarnysotd on . •, . . - . . "'·
a recognized market · or ,the . subject' of widely
- ,:•
. Note: Although- the PPSA grants the higher-rc;Jnked
. distributed standard price
., quotation (Sec ... 49). . se.cu'r.ed .cr~ditor the rig~t fo.~~k.E:3-0Ver 'enforCef\)eht, .
if,th~ higher"ranked cred\to(fails _tp take over)t'does.
Note: Disposition after default is similar to · not share tn the .Proc.~~_ds of_ the gisposition effec_ted
' extrajudicial . foreclosure, under · the laws· "arr Real by a lower ranked se'cured creditor: . . . .
Estate Mortgc1ge. · ·· · · · · ,',-.., • ·,, I

• - ' . 1.

. . . .The innocent buyer at the dispositjon of t~e collatE)ral

, Commercial Reasonableness c:!cqJire~ · the granto.r's. righl.in the a~set free -~f the
.A . disposltion · i~'·.cornmercially reasonableiif the . _ ·rights c:if any secured creditor or l[en holder ·(R.A.
secured .creditor . disposes of- the collateral 'ln 11057, Sec:.53). · ·., · ·. . . · ·
. conformity with corrimercjal practices .among dealers
in that typeof property. ·. . . · · . . , . . Retention.of Collateral
. R,ele.ntiqn of collateral is the .i::esult of. itn_ offef_on. the,.
:part of the se<;:ured· cre9itoJ (\h'e proR9sal) ~n.d the:
·. acc~ptan~e q\
th~ proposal ~Y the. p~rtje$ entitled to
rece1~he..,1~1J>posal: . . . -: , . . • .: · _ .
1. - 1.n ·_'case;Jh~ proposal rs for full. ~at,_~factron,
. . ·. acceptree i.s. deem~d ~iv_en· .uh_le.ss the parties
· deliv~;a~,ol::}j~ction in writing.. _ ·~·
2. .If-. th~ Rrop~$i:!I is ·· fo.r ., pa~ial satisfaction,
"·'
_acceptance· .~
·must 1$ e . y·a· m1rmat1ve
b1;;_estc) bl'h'db · · ,,,
65'~~1it iff YJriting,of all the parties .(.Sec. ·o4f. .
-.~· .. ~ .~. .. . .··.::·.
:· · Note: Ttiis is similar to.dacion' ei:i ·pago, 'not pactum
commisoriurn b:ecause there is'an· offer or.'approval, .
. and irocGttr$ only after default ·. .'.- .. · .. ~ · - · ·-
. The right;of redemption under the.pPS~ pa"rtak~s of.· . . . '
an equity of· redernptlon as -ltmay- be e?(ercised·· . $t~ps_ -in_ Applying·. the Rule~ fo: Preferen.ce :and -·
.... unless: . . . . ·. . .. - . . . . co·nc::1:1rr~.rfce .'of ·cre.difs:. as ·c11riehded:·bf R.A
· 1.. The person entitled, Jo. redeem . h.9J not, after : . . . 11057: .. ,· ·. · ' . · · . · .. ·. .~.:. · .. _ .· · ·
,,.~ . . ......;.,. ·,
default-waived in writing the right ot redeem; ·
~- The collateral i$: sold or disposed, acquired "oi Note:. The. following is nof y~t effectiJe as no: I.R.'F?:. .
collected. by the secured 'creditor or-until :,th~, . yet hf!S· bee']_·issued as of the date-·of printl{Jg, and .,
conclusion of an .aqreernent · by the secured PPSA 's. implementation is conditioned · vpon the . ·
·c,reditor for tha·t purpose;.- .: ., · ·· · . restablishment . anfl. operation of.. the R~gistr/ .in . .
, 3. The · secured· creditor retained the .:qollate'ral . af;cordarice with' Sec . .' 68 df1he PPSA. . . · ..
· · -:(R.A. J?t.057, ·s~c . .45). _·. .r-

St~p 1:. ···~ ,-·. ~:..·

Application ~f thJ P~o~e~d~'- . . . ·."· Determine, if · the . liabilities exceed the· assets ..
·1. - The proceeds of disposition shall be. applied in Categ:orize the· cr~di~s in_to· the· toi19wing:·thr~e
'. t_he' followfng order: . .· . · · · ·. ' · · · . - ¢ategories: "'· . ·-· · . .. ·.· . ._ . .
: a: The reasonable expenses of takinq.holdinq, :1.. .Special_ Pref~rred Creg_its inArt.'·2242 ·and· RA - ·
.. : preparing· for.dlspositicn, and disposing of. . No. 11057; · . v . • ' • ·

. the · . collateral, · · including reasonable 2. .'Ordinary Preferred .Credits under Art. 2244;
. 'attornev's feesand legai .expenses fnc'=!_rred 3. Cpmm9n er.edits under·Art.'2245. . : .. : .. -
:· bythe secured creditor; . . . . ' . '. ·.
· 'b. The satisfaction of the obligation secured by Step 2: . . . . . .
the securltytnterest of the enforclnq secured . D~terrilihe or make an -inventory of the assets or,
creditor, and · · ,. prope'rtie:s of
t~e insolven~ debt0r.. - . •.
 C-REDI.T TRANSACTl·Q:N~S
SAN BE_fJJ!, LAW CENTRALIZED BAR OPEl}ATION!> ~ MEMORY AID 2019

-Step.Sr. .
Seg,r.egate specific immovables under Art. 2242 of QUA$.i'-'-CONTRACT.S.
. the .Civit, Code. Only credits in numbers (.1)' of Art. .. (ART$. ~i4_2·-2176.)
. 2242:enjoy preference, allother credits enumerated
therein'; have no· preference and · the · rule · on
concurrence. applies to these .credits, ,

. •'
·. ·;

:, ...
... ...

.r r-; .
 .,-Q5¥*6¥i
.
MiC·R=E.D1T""i-RAN·S A.cT'*i·OgNs;gp=~'
~N 0
1

BEDA .l.AW C£Ni.RAilZED flAll OPERATIONS - MEMORY A/0·2019 . .

.~·R··. wm1,~ .
. L N'»sfflt?.f M9tif •z:t:W!'t>SSit#t:f**: ek-#:i!SC'i9{ify§ zt!¥3!.fu1 ME, St!; at5jW:faut®B'h t&ifi&;w; .. ;·.nttn;.;;,;;:p,rPE:c."'
~
'-.
5. .Th e · officious. manager (gestqr) · must have :
0 4. s·e personally liable for contractswhich he has
voluntarily taken. charqe (that is, there must be enteredinto with third ·persons, even thouqh he
. no vitiation of consent, such aserror in thinking . acted, in the- name of the owner, and there shall .
that he owned the property or the business) (5 ·be no right of action between the owner and third·
.A.
PARAS, supra at
1..15~) .. . . . persons except: .. · · . .- · · .
a. Wh.en the .owner has. expressly or 'tacitly'
Negotior~m Gestiov, lmplfed Agency_· ratified -the' rnanaqernent, or · I
b. When'the contractrefers lb things pertaining
to the owner of the business (CIVIL c;oDE,
Att. 2152). ,F- ·: .: , ,:'

: -Not;· The res~~nsi.b.il;ty·ot two o.r more officiou~

Gestor . should .: 'never The·. agent 'is. actu,aliy- I marfagers'. shau: be . solidary, : ·unless: .the:
have 'been authorized in authorized. to . assume -.· management was-assumed to save the.thinqs or ..
any mariner. the agency by virtue of · · d · -(CIVIL CODE
. ,., the acts> df. the owner or . business from imminent anger. . . .\ .. •,'
.by virtue ofhis sile6ce, . Art. 214 2 ~f~~:· H
and: ..: .. , - '
· inaction, orhis failure to 5_· '. The ;lficious rnanaqer shall-be liable .for' any .
. . rep~diafe 11\e a.ge_ncy. ·_ fortuitous even( ;.· -, _ _ ; . : _ ·.,.; ;;- . ·,_
11~1~[4il~Ri~~~~~,
=:
~-~·!~:
•'
;..·~ a. If- he- undertakes risk1 operations which the.
t •

. . owner wi:i's riot accusiomed to embark.upon;

, · Business _ - or . ;· property N.egiect -._. .: · b. .lf ~e- has preferred his:owh interest to that of
. I
should be neqlected or abandonment is· · the owner; .. · .. :· · -.: . - ,.:·-.· :· .. ·.....• · ·
~Jta~do~.ed. . . ) . ·. nece_ssary.. c. . · 1f he fails· to return the property' or business
·(§:!:.~RAS, ~.up!'a .a(1159). ' ... · . . ~/ , ·gft~r ~em.and byJhe.~w~_e_rr·· ... :~· :. · :· ....
,-' · ·.:- -· :· · . , . ,:- .. . , . .-d ..
IH'le-as,.sumed ttie·ma~agement batj faith m
Note: .. So. l_ong as the owner does ·not know !~at .
(CIVl/l CODE, Art. 2147}> · .:·.. "· · .
· , .. ano!her: is. a~!in~ on ._his behalf witnout futh~r(~ e;,
.Exo1mt whe.n. the management ·, was ·
·. nf!gotiorum gest,o exists;- ·but orice~e 5~prne~ a?su'fed~fo save .. the property or t,_usiness-, _
_ aware of such,fact and s.ti!l::.he d~~ npt re.P,}ld1.9t~ lhe . ·
• ?._Cts).9ftt")e 9:geilt, the. quas1°coritractic~_ases. !9 ex1sff, .
It has .become-an implied.agency (5 f!ARA·S, supra
;(. ,If. h'e 'S
fron'h rnment da.nger:7". · 0

manifestly ·unfit)o carry·. the.

managepient; · ·. . ... -·.- ,
.- •.

. : -''.. ·-
• , • ,. .: •

:.· -at 11.5~) .. ~: . . . ii',~.y~his interveot\on he ,pre.','.e/1fed ·.·a

'. . . ,' . more
·:competent per~qn· from. ta~ing up
.. Re~pb~-~i.b.ilitiEfs .of the OfficiC>US. "4anager: ' ' ' ' -~ the rrianageme'nt . (Cf.Y/1".r. CODE,· 'Art.\
· 1 .. Continue· ·laking. 'charge of .the ag_woy.. or.' · - 214Bi,: .··. ;····· ": : .. -., :.- i. .·,· ·
__ , man~g~-m~r]l"unJ!I the.- terrnin.ati~n_· 9;"t~f affa~.- · . ;.· \ _ .- ..:·: .... :. ; . .- } - . : . ;' .- . . _. '- · _ '
1
~-n~ its 1n?~~~ts,, bqt_ ~~- may requ,'.~ -.the.?~-O~r•. ·- Respons1b1J1t1e~ ?f,the}1~ne~~. -. .; .. ·,_. . : · , .. :1 . ,.
_ .· _if:the latter.1s·11:i-a ~0~1ll9n fo._:do so,.!o su1?5.t1tute -
0 , The. oymer: of .I.lie. prdpe_rty shall b_e: haple f?r
· the officious mal}ager. (CIVIL CODE, {'\rt, ~141): . · .. · obligations::.incurred~ ,in .his·. interest; - and.: ·shall
·• ·. •• :',- ·. _.:. .. ·• - ~ .· • . • . - :, ..• • .• _ · v-· refmburs'~ ~he qfficious ·m·anag~r for~th~ n~9.~ssaty ..
2 . ., .P.ertorni" hjs d_utl~§ with all th~ dilig.enc~ ot_a. ·g~o_d - · · .· and. tiseful: expense·s an·a·, for .dafnages;- which the
. f~!~E=lJ of;_a-faryiily, arid P.ay .the dama~e·? yvhii;;h . ·Jatt~r may-have suff~re~ in the peftorm5'ince _o(his .
. throygh his. fa!_Jll or. riegligen<;:e . .may·b~_suff.ered-.) . duties iri the·follc:iwing instances~ - . . .re· - .
·by .the owner-of Iha property Or b!]si~~ss ~nd.er · .· 1 ... When the:~-owne·r,; of, .the:.: pr.operty ·,o'r bci.siness-
: .. ·- . m·anagenient •. b.ur: t~e courts . m~y . ho'."'ever;. . . ' :, e'njo.yed·, .':ttie': . .'ad~arita:g~·s . ·bf ·.!_he,, .offidous,
in~reas,·~ or,mode_r~te th~ indemnity ~gcor9il)g to : - management ,although·· i_t ·rnay. nqf have· be.en
,ltie ~ir.c;:.umstan.ce~ of ea~ti- case .(C/VfL". <:;ODE;- · · _ , :expressly ratified by) him·: (CIVI~. CODE;·. Art.
\ }L\rt. 21_15); ,. "·.:2150, Par::1J; ·'.'.···. ;- · ;··,· · ·· . · ... · - ·
~ .. · .. 2. ·wnen the nian~Qenient. hcis~for'its· pl.Jrpose .the
. N9te:.:· .. ·A.,
gi~tor: . is· ,liable )or.'. th.e .:aCt$ . ~r) . prevention, ·at .. an
irr.1111ine'nt., a~d.:m"anifes( loss,.
hegligenc,e _of his ernployees-(5 Pfl.RA'S;. ~_upra · ·_· although' no benefit--.niay_ ,h.aVE;l . b_ee·n ·derivetj. .
ai 1166). __ ·· . . . ' . . . -. . . .· · {ciyJ/J.CODE,.Ait, 215.Q, Par. 2)..... _.: ,. · ·. ·-
' '. :3'. Even if theri:r had be.Ein rio .benefit the .own'er to
-~ 3. Be liable· for· the acts· of his delegate if he and there has, been· nc{imminent ·and-manifest
-delegated to ai:io!Jw~- person."c:!11,oc s.om~ - of :hi$. d~nger to the ·property o(b~siness'prqvided:. :.
· d.Uties·, with9ut p_rej_udjc~ tcfttie direct oqliga~iO!'}. : . ·: - a.. The officious manager:h.as ·actea .ih ·good
. of the d.~legate to\Nafd.t_he qwner.o.fthe bu$i11ess·· : · . · · ·faith; ahd·· :._ ·
· ·- ·(CIVl[JJODE, Art. 2146, par. 1); ..
,, .

20i9 SAN SEDA. LAW CENTRALIZED ..BAR OPERATIONS I 717

 ---------------------
. .

CRE·DIT TRAN.SACTION·s _
. SA.N BEDA LAW CENTRALIZED BAR OPERAnONS - MEMORY AID 2019, · .
~
. ~w::x:amttW@4Mi%tdetS3!'¥.1M!S!!}
. . ikR·W'{d:SW#Pi{@
. ,•
,ae.• %tfi¥rA!f#ifti¥t#iiifMZ+w:Git?kt##49i1't5W MfAffi:J
b. The property or businessis intact, ready to · No.te: Payment by ajoint co-debtor for thebenefit of
be returned to the owner (CIVIL (;OEJE, Art. another co-debtor or co-surety is not solutio indebiti
.215.1). but a payment by a person interested Jin the
• • I • fulfillment of.the obligation under Artide-1236 of the"
Note: Even if the owner is a minor; he- is still liable Civil.,,,..,..-..._
Code (5 PARAS,
. 'supre
. et 1165) .
under Article-2150. of the Civil Code for he-should riot
be unjustly enriched at .anether's -expense '(5 Prlmary Responsibility of aPayee: To return what
·· PARAS, s·upra at 1'1.62). he has received 'through error or mistake· although
there is no right .. to demand it (5 Paras, supra. at
Liability for Contracts . 1164) .. · . . . . .
The owner shall be liable for contracts which· the
officious. manager· has entered into with. third Liability. of
a Payee. in BadFaith:
. persons when: .. , 1. · pay. legal.· interest if the sum of money is
1 .. Such owner has-expressly or tacitly ratified the - involved; or ·_ _ · ,
management; or . . .. : I . 2 ... Uabie for-fruitsreceived orwhich should.have
2. The contract refers to. things pertaininq to the ·. · · beep received if the.thlnqproduces fruits ·(CIVIL_
. owner of the business _(C!VIL CODE;Art. 2152). CODE,.Ad:-2159, par, 1) ..
' . . . .. ). . . .. ·v. ~-:- .. : : ,, . .; ., ~ ·-~·· . . : -.... . . .:_~~-· .. . . -~; . . . . . . . . ·.·· .

When is Manageme_ni'Extinguished:
.1 .: Wh·en the· owner repudiates It.or p~a~u·
thereto; · · : . . ·· · .
r . . .

..,-..,;.;.~ ~ ·
• Reason: Tne:P?yee assumes all-risks having
N'·
ac::ted ·Jr,ai.i~l).ler:itly_.· tho.µgh darnaqes may be'
·· mJ.ticilte,d ,urid~r _A_rJ:. ,22J5 of the Civil_ C(!d~ (?
2. When the officious manager-w1thdr9~frqrn~f,Rf§, uera af.-1168).. · · · ·
management, subject- to the pr~i~o.n~~~Af11cle ~- .. ~ · A'\. . ; ". · . . . . .· "
2·144. of the C_i~jl C?~e!;and£ ;_Y./i~-,'3,1
-Si-,..H~shal~~rt~erm6re be:ari_swerable for.any.l~~s:_
3. By the, death;. CIVIi .. mtercl1ct1or'./msan1ty .OJ) '")f._C, "¥!' or 11rpa1\rll-~tof. the lhmg from any CaLJSe :and
·. ins.olve~cy of''the ownerf f1i7JC 0USf. anag~r . ~. .·•. ·."' . /&. ·fo~· -~~ma~~f . ·to th~ pers9n _y;,ho deliVefe.d the
0

(CIVIL _CODE, Art. ?_1531 . :. . . ~··. · t~m~ unM\1 ~· 1()-~co~ere.1. (CIVIL CODE, Art.
2f.____.Jl : . '
~-. .;~d!: t~~~\. J · · ., \ r;:- ~ \ . · . , : .
111 ... · 21'59: par.

. . · · ·.
• · • : ,·~ •

So_l~tio_Jnaebiti . _ _ ~, · . · _ ·
This takes place whe.n sometl]og ~s re~~ived.wh~r(f.,1\1, .;i}1a_p1ht¥ of.Payee rn~Good Fa1tli:. · -'· ·
the:e is·. no· righ~. to. dema~~"'fi.,t.:~rid'. i~~\ ujlduly -~~E1:_- 1. in ·c~ffeii3pnrn,1tpair~1nt .or" loss, li~bility is oniy fo
f
Q~E ~(t~fe.:._ . ffij· i"' . t~e -~~ent '), ~b~~~f~; a.n? : .:
ae~1vered thru m1s~ake (CIVll
It_ 1s _,pre~urned. th_at the~e ial \ii1staf~
pf!yment_ 1f:someth!~g·wh1ch nad never· bee~ 1·e\'?r· ~'1
:a ,tH 1~ t~ ~~~ · . . . ·, ·
pfih~na!_1gn_, ·pnc:.e is_ to be re1mb.~rs.e:cj,
L~..!2l
1~ff°as.~of .~red1t(the sam.e s~ould be assigned
had. a_lr~a~y b~en .. ~a_id "'."as:9efive,red; b!J.l He/f6~..
::::~~--£:(,~{VIL Q;0E?f=,·.Aft~?f60):. · .' 1 ·. _·<" :: :·
wh?m ·the_return 1s cl~1m~q rt'l_ay ·prOV(!l th_e_t ~[:b"'-l.'1"'\ ,>...:-'.)-\ / . · ·./..;: .:··. · .· .. __ · . . .
?e.hvery was made out o!:~1beraJ1 y,~fo_i;an~~·e,:..:::~"U: ~;Jh~S.P.0~~.1.b!_~1ty. o_t two or P~Y.ee~, ·m_?re..
'<~tJ""'']·~- ~ .
· · · .-
JU~t c~u$e (CIVIL CODE; :A,rl. 2163):..
·. : · · . · -· · . . · -M
---P~ym~_n_t·~y reas?n of a mista~e· i~ !]le --~o~_str.~on f · ~--. -_·' .
.~.Qf[l.'tfier~\~lti>e~n. pay_n:en_t <?f wh~t 1s not due 1s
~oi1a.i~tc1v1_L eoDE,· Art. 2157)., . . ,
. .... · ' . '.. '. ·. ·. . . . - · ·.
_ or-appl1cat1on of:a·do~btful:cx d1fficult'quest1q.n,of.~Exemptton from Obltgat,on..to Restore · , .
may con:e withjn _the s~ope o(solutio indfibiti-(C/Vlt . . ~ T_nis-:ex'em'ption· ,shali; app IY 'to :a;payee;-. believing. 0

:CODE, Art-: 2155). · ·. . ... ·.. : · ·:'. ... : ... · . go'od ·faith··tt,at'.'ttie· paym'eril b~ing:rriade .was'for a·
' ' .. . . . . ·, . ' ' ' ' legitfmaten!nd s'ub's'isting tlain\ wlfo: . ·: •; . . . :.
No'te:· Whether·the ques'tion is -"doubtful. or difficult" . r-.
Destroyed "the ~Qcum.ent; ·:.,- . _. .; .. ·.. '.·, '
or not in_u-~fb~ determiritd by ·the. act~a1· knowledge . 2 ... ·A1_1owe?.'tti~ a_cti6rH9 p,;escribe; -. · ·:: · '·. ·· . . . . .
qf la'A'.;pf th~-:perspn· wh~ -made-th'e· paym¢nt..lf the · . 3-.. Gave'Lip ple'dges;'or . -:> -_, ,. : · · . '· ··-
payer-was ·in doubt ·whether the· debt· was due~ he . 4,' C~ncelled'guarnn'fies. for .his right (CIVIL COD'E, · · ·
· ·may, recqver if he.:prqves,''that it was,riot aue'.'(CIV/L · · . Art, 21·62): . ., -- . ..
> CODE, Art .. 215_6J~ . . : . . . .. . ..· ·:. ·..
·Note: He. w.ho P_c~id ltrftluly may pr.o,ceE:idonly ·agc1!i,nst
R.eq·ui~it"es ''ot s·01utio}~del;,"iti:'· .·. . . . ·~.'.\ :. -, thEt!rl.le 'debfo(or 'thegua-_fa'ritq6witl:i Whbrri the·'action . ·.
1: Re9eipt (not- .mete iacknowledgment) . of j.s stiU e.ff'.ective (CiVIL-CODE, ~d 2162).' . · ·
SOIT)ething,(G/.VJL,CODE;'Arl<.2154);' · . .,;-· ;~ .·
2 .. The.re was. fiO right to demahd ·it becau_se· the · Right pt
a Th.ir'd.-Pet~o:n .
giver haf n(! '091igqtibn (5 :PARAS, ; supra· at . W.hen trie:property deli\iere,d:or money paid belongs·
1164):·and ·. · : ,. . ,' ' ,, a:
. to· ·thircf p~rso.n·, ··ihe.:,payee_ ~hall· com11ly 0wfth·- tt:i.e
3. The undue delivery .was because· of mistake prov.isions of Article· ·19~4 qfthe Ci'-'.ii_.Cqde· (CIVI!- -·
eith~r .. of fact or of law, which m:ay be.dol.ibfful or CQDE, Art. 21·_58). · . · ·. ·.· . ·.. :·. : ·.
difficult questiofrof la.w (CIV.IL CODE, 2155) .. I/rt-

7)8 2019 $_AN BE.DA L:AW CENTRALl_?'.ED BAR OPERATiONS

 CRE.DIT TRANS·ACTl"ONS
SAN BEDA I.AW CENTRALIZED BAR OPERATIONS - MEMORY A/0 2019

Other-Quasi-Contracts 7.' When by accident or other fortuitous event,

1. When, without the knowledge· of the person movables separately pertaining to two or ·more
obliged to give support, the support was given persons are commingled or confused, the rules
· ' · by a stranger, unless it -appears that 'he gave it on co-ownership shalf apply (C/YIL CODE, Art.
. - out of piety and without intention-of being repaid 2170);. . - .
(CIVIL CODE, Art_. 2164); . . . . '
8. When a. person. has found a lost' personal
Requisites; . property .(CIVIL CODE, Arts. 719, 720, end
a.. Support has .. been furnished in favor .. of a: 2171); . ' .
· dependent of- one bound to give support but
· wh_o fails to do so: _ 9. Wh~n a possessor .in good fa_i\h has: incurred
b. The -support was supplied by a stranqer; necessary ana useful expenses (CIVIL CODE;
c. The same was given without the -knowl~~ge · Arts. 546 and 2172); . -
of the person-charged with the duty; and
d. It must not have. been given. without. the 10. When:c! third person.: without the krjowl~dg~ of ··
expectation. of recovering it (Ramirez v. - the debtor, pays ·the debt (CIV/L-- CODE,. Arts:
Redfern, G.R. No. 26062, December
. I '
3°1, 1236, 1237 and 2173); ·· .;
1926):
11. When in a small community a majority of the
2. wnen funeral expenses are borne b/ a .t~ird ·
inhabltants of age ..decide upon- a· measurefor
. person, without t9e knowledge of the relatj~e? /, protection against lawlessness, fire, flood, storm,
obliged to-qive support· to the' deceased (CIVJ'-l or other calamity, 'anyone who objects te the.plan
CODE, Art. i165); . . · . - and refuses to contribute to theexpenses but is
benefited; by the. project as -executed 'shall be
3. When the person .obllqed to supportan orQlian, --~liable to Ji>?Y his share of said expenses (C!VIL
or. an insane. or an indigent
.
person.
A.
tfuduly CODE, 11rt. 2174); and · ·. · · · .
~ ·-. j ~
refuses to. give support to the latter, a-third
. person furnishes the s4ppo_rt (CIV!l!::'CG>QE, A~, 12. When., tt:iirct ~erso.n_.was cc:>nstra,in~d .to· pay t~~
.2166): . r ·
. .
. taxes of a'?iot~e( (CIVIL GODE;.Art. 21-75)..
'• / . :\ :
. ..
:: N~te:. 1hJ ~~~eg~i~g p~~vi~ions', af~ _:: mere
·illust~ion~-
. ..·0f . ottier · specitlc · cases 'of. ,
. qu?fsi-·
contracts: th.§....enumeration has no preclusive .effect
.
on possible other ihstances (5 PARAS, supra
:l . . ' ' . ' · .. ' ' .
at .
1 1 z6'J•.
• - ,,. \.. " - '• . . ,...-: '.' i• .... ' I'

~- When throug6 an accident or' cause:·a pe son is

..... :.,:•... -~ .... ~
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consent to a contract, he shall ·be 1iao1elt0 pay
.... ·. ' .... · ':_ .....
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· aidinq · him, unless )he service . has been
· rendered out of pure generosity (CIVIL. .CODE;
.Art. 2167); · . ' . . - .. · · ..
- • .. : • ' • \ I-~ ••
.·· .· .... :· .....
. .. . . ....·
5. When· .during a fire, .flood·, storm; or other .. .._ ..
·.:
. ~alamiiy; propertfjs savea frc:im destruction:·.by
. ?"nother·_:person withou.t the knd"':'le_dge of th.e. . _.,. . . ..
---:--
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•• ·_ ..... -...J ..... . ·.......
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p~rson. to . COIJlp~ Wit_h -~_heflth. or safety.
regulat1.ons conce~n11:1g property, undertakes .to
<;f.o the n·~cessary work, eve.n· over his objection
- .. '\ -
. . (CJ.VIL .CODE; Art. 2169);- · · · .
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