CREDIT TRANSASTIONS Types of security All transactions int ving the purchase «t 1. personal ~ wher, an individual becomes: goods, services, 2¢ inoney with a provaise to pay ‘surety oF guarantor fr dealer in the ful ate P. teal or property ~ when an encumbrance Is made oh property. Contracts of Sect rity: Types 4. Secured” tra sautionsiconteacts of al Bailment: The delivery of property of ono person securily - trarsacllons supported by a to anathat In ‘rust for @ specific purwose, wih a colateral or'ais encumbrance of property contract, »xpross oF implied, that the trus! shall be ‘The encunittanco Is otfe ted as follows: faithfully executeit and the property rolumed oF a. In pledge, by” placing the movable duly accounted far when the special puipase property 9 the posnession of the crestor; accomplished of kept until the bali clainis b. in chattel norigage, by ths execution of the corresponding deed substantially ih Parties: the form presciibed by law and the 4, ballot = ore who delivers the possession or feglstratic: with the Cnalte! Mortgage custody ofthe thing batted Rogistry, 2, ballee ~ one who receives the custody or 8, Inreal et: te mortgage, by the execution possension of the thing thus delivered. of. pubijy Instrument cncumbering the real-propety covered theroby and the Aoltmant for Hira ayes when goods ot let ‘annotation’ of thy mortgeige on the Ile AH with the Reglaty of Deeds, and Aer by him 4d. in antichests, kya written instrument at ‘granting to ths creditor the right to receive SAN REDA tie frults ofA Immovable property with: the cbligetion to apply such frults to the payment of th®. interest ond arhicipal obligation ‘Aone Shoe, Rubber & Plastic Comp, v. Jourt of Appeals, G.R. No. 103576, At gust 22, 1996). 2. Uneeoured trét sactions/contracts of personal secutty = wuneadtors aopored cry By Bea foots promise, or coinmn'tment of another such as a Arse me ond guaranter of euety Security: Something given, deposited, or serving aga moans” te. ensure ehforcemant of an thing feawedd i is necensay Gr the Sa ction oft conte ‘executive commitTes: HERDERT CALM ABUGAN vera chaser haw academies upetations, MANDLO ADEL SANTOS cha tel operators, GRACE SARAN TIA ee alr for operations, UAH CALE NUESTRO ven cul for acai, ANE AMGEUE CTANG Wo chor teeta KRIGTNE ANNACELAEE HIS ion char for rane, ER MERIAACOSTA ae hn fo ep, AE JELLO CONCEPCION wa hn fra cent, * FRANCESCA LOURDES Sut) A subiect cha, SHEAR MARE ARELIA rctat sublet chal, ACF AVI GNYIRO wep, FPANCESCA LOURDES SEGA ‘persons and fairl 8, CUSCELYN CARAYUGA property, MA. PFUSACPAZCN PANO nc MARY 1 ANE GALANG wild sucesso, [MARIA DANIAFLOR BERAW Od COLLEEN INFANTE obigtlons and cont, MARY IVY ANNE C/LANG sas and lens, EVA CHRISTINE NAPAIUAN Jarier, agency and Wott KATHERINE ANI SILO credit Wrantacton,SHLENA MARIE ACELA tris tne damages, JAN PEAML PORTIS. i {Wes acd deeds a2 MAL ELLE TEYES conc: of ans Memes : ‘Aldrn Akio, Loyd Elna Azetol,Janara Avene Jonathan iets Paul uae Karrame, hair ener Batts, fone Bora, Lea ise eth Fran tones, Fin Casting, Vela Congc, kine Paula Cx, Beaeito Clava Die Therese Dou, Herbert Oa Mya ive Dorings, Ana Coda dri fees, Menana OiAito,CinrstaEnno-“aenanc, Cava Esjuana, China Fane, Leoponve Neola Warnbul Sou Xstne Ceres Gorslet Dalry Jy flee, Roe Tosnn eho Lamu, Flacertina Ure Joram Wits Hadbet Mallet, Chie Cn, andor, kite! Concapn Ona, Joann Marie Angus, Patra Salar, Chnltna Santas, no res Santor, Chast Says, Mary Mt Sut, Jewel Celdd Taub, Te-ence Taleo, lp Tate, Gili lia wev, Jean Gives Wino, Joshus Vion, Rau Ca.on Deograc Bt ad228 [2009 CENTRALIZED BAR OPERATIONS, GAUSE OR CONSIDERATION Reason: delivery is necescary in view of the purpose of the contract which is to transfer either the use or the ownership of te thing loaned. Note: An acvepted promise fo make a future foan is a consensual coniraci, and therefore binding upc the parties but it is only after iclivery of the subject matter, will the real contract of loan arise (Art 1824}, Unilateral Contract — once tha subject matter has been delivered, it creates Obligations: on the part of only one of the partias (ie. borrower). 1. as to borrower ~ tha acquisition of the thing 2. a8 to lender» the right to demand its raturn or its equivalent KINDS: 1. Commodatum ~ when the bailor delivers to the bailee a non-consumable thing so ‘hat ‘he latter may use it for a certain time and retuin the identical thing. Kinds of Commodatum: a. Ordinary Commodatum -- use oy the ballee of the thing is for a certain pesiod oftime b, Precanum ~ one whereby the balfor ray demand the thing loaned at will if ary of the following exist: i uration and purpose of the conuact 's not stipulated li, use of the thing is merely tolerated by the owner Simple foan (mutuum) ~ lender delivers to the borrower money or other consumable thing upon the condition that the latter shall retum the same amount of the same kind and quality. Commodatum and Mutuum Distinguished NAS ouSieal wimable 1 Correlate with’ Article San Beds College of Law In case of ergent nzed] Upon expiration of the Jand’ commission of any! term only acts of ingratitude, even before the expiration. of [the term person {0 money or land the receipt of o’ner| sorrow party of a given sum of| things by virtue of the money ~ “or her! trust of confidence ‘consumable thing upon] reposed by the lendar fan agreement, oxsress| that he wil gay what ‘oF iniplied, to rapay the} he promised within a same amount of the| specified period, same kind and quel, with or without interast. the concession of “credit” necessarily involves the granting of “loens" up to the limit of the amount. fixed in the ‘credit? (Pooplo v. Concepcion. GR No, L-18535, August 15, 1922)fan Beda Callege of Hae + Ifthe ballee Is ‘lot entitled to the use of the thing, the contract is deposit + A slipulation that the ballee may make use of the frulte of the thing loaned ia valid (Artcts 1940), CAUSE: Essenlially -graiitous! but (1) if any compensation is to be pri by the bo--ower there arises a lezse contract; (2) If the consideration fs fendering some service, an innominate convract vallresult, 8 ‘+ The presumption in that the ballor has loaned the thing for having no need therefor. SUBJECT MATTE! General rule: Non-consumeble goods, whethe! movatile or immovable proparty (Arts. 1935-1937) Exception: Consumabie: goods riay be the subject matter of conimodatim ifthe perpose of the contract 1s not the consumption of the. object (Art. 1936) Baltor Need not be the Owner of the Thing Loaned (Art, 1998) + It is’ sufficient that the balior has aa) possessory Interest; of b) the right to use Which ne may assert against the ballee or 3rd porsons but not the rightful owner, + Ammere lessee or uoufructuary may fend Du the borrower or bailee himself may rot end nor tease the thing loaned to him to a third person (it, 1992/2). COMMODATUM 18 PURELY PERSONAL: + Intransiniasible ight (this is daenivd an ‘exception fo Art. 1178) + Death of either party terminates the contract unless by stipuiation, the commodatum is transmitted to the halts of eltker or botir parties, Right of Ballog to Joni the thing toaned to third persons, Goneral rule: Aballes‘can neither tend_nor lease the object of the ‘contract to a third person, Iq. the. absence, ot some understanding or agreement to that effect, Exception: Use of the thing loaned may extend to mambers of the ‘baijon’s household, unless {oxcoption to tho excopti=n}: 2, there Ie a contrary stipulation; or natura of te hg fords eucn use (pan2, Art, 1939), CONTRACT SIMILAR TO DONATION Both’ confer benefit. to the. ceciplent. The ‘presumption Is that the ballor has foaned the thing a) MEMORY AID IN.CiViL LAW 229 for having no need therefore {sscond sentence, Adl, 1946) OBLIGATIGNE OF THI BAILEE: Preet ipal Obligations; {ake care of th iicg with dilgence of @ good fathor of a family (is, 1763, 1969, 1770 and 173) 2. raturn the thng upen expiration of tems. or ‘uson necomplishmrt of purpose (Art. 1993) thar obligationa: {0 . JERO} + Poy for the gicina’y expanses for the use end presurvation «x1 tha thing luaned (At 7941) fo 20 liable for sp even If it shoul be thro.gh a foriita,s avent in the following cians (Gn excaptieipto the general rule that tho bull ls not aif for loss or damage due tu a fortuitous event becouse ownership remain.with the bal: (KLAS-O) 2. when h keep. If longer than the period supulated, or a'tar the accomplishment of iis use (datay); b. When he fends or leases it te third persons wro are not members of his hhoueshold (commodatum is purely personaly, ©. whcn the thing loaned has been delivered with appraisal of iis value uniess there is a stipulation exempting the bailee from responsibly in case of fortuitous event {intention of the panies), 4. when, being ablo to gave either of the thing borrowed of his own things, he chose to sive the latter (shows ingratituday: or 2 when the see devoted ihe thing for a pore oa yates BGA a i te230 ]2009 CENT ALIZED BAN OPERATIONS sutfered t2' tne balleo because of hidien faws krona to the batlor © The right of retention ceases when the bailee is ra mbursed «Tha ballee cannot iawfully sell the thing to calisy the damages 8, To pay for the oypenuew other than those under Arts. 194 and 1949 fe.g. ordinary expenses for be pranervetios and expenses for ostentatior) Note: In case there -are multiple baslors, thelr obligation shall by solidary. Ta's is an exception by express provislan of law to the ganeral rule that the coneurrarae at two or more paities in the some ctligation gives tise aly to @ joint allgation (Arts. 12.97, 1208) Reason: to safeg Lard effectivaly the rights of the bailor OBLIGATIONS OF THE BAILOR: 4. To respect thi duration of the loar because the bellor is bound by the terms of the cantract of corermedatur which is fora certain ‘time : Exceptions: a, in case of urgent need of the thiag, he may dematid Its retum or temporary use, Reason: commodatum. Is“ essantially ‘gratulious; Effect: contract of commodatum is suspended while tho thing Is in the possession of the ballor 6. |F tho Béillee ‘commits any act of ingratitude specited in Ar. 705, Reason: smilarty of commodcawm wih donation 2, Refund to the inatlee extraorcinary expenses incurted for, the preservation of the thing, provided thé ballee isrings the same to the kaowedge of ice balor before incurring them, except when the raply fo the notifeation cannot be awaited without danger. 3. To be lable tc- the bailee for damages for known hidden flaws, Requisites: (HANS) 1. Existonce cf fiaw or defect 2. The flaw e- defect le hidden; 3. The ballor ia ware thereo? 4. ballee le 99° aware tha-eot aad 5. Tha ballag quflore damagns by reason of seid finw or dotecr. Note: Ifthe above retuisites concur, the bailee nas tha right of retertion for damages. + The ballor canvot exempt himself from the payment of uxpenses or damages by 70 San Meda College of Hay abandoning the thing to the balles, Reason the expenses of, damages may exceed the value of Hive thihg loaned (4rt, 1952) + If In making use of the thing, the valloe incurees expenans other than ordinary and edraordinary expenses, he Is not ented to relmbursemart (Ans, 1207, 1208). a contract whereby one of the partlos delivers to another money or other consumable thing with the understanaling that the sama amount of tho sams kine aiid quulty shall be pald (Art, 4992) + Itinvoives the rotum of the equivalent amount con'y and not the Identical thing because the borrower acquites ownership of the motley or other consumable thing loaned (Art, 1976) «© Aloan of money may be payable In kind (Art 1968), Note: x ; + Mere, Issuance of checks to the deblor doos ft perfect the con'ract of foan. itis only afer the checks fave’ been encashed by the debtor that: re -contract may.be deemed perfecied, +The destruction of the thing loaned does not extinguish one's obligation to pay because his obligation Is not fo retum the thing foaried but torpay a generic thing, + No estafa in committed by a person who refuses to, pay his: debtor denise lis existence. a Raason: thy’ borrowet effectively acquires ownership, 4 Mutuuna and Ront OlstinguishedSan Bed College Lato Loan and fia Distinguistiod Real contract 1 Cantona sonra Generally unitate: aly Biletoral set reciprocal because only borrow or; faeces ; Note: if the property 1s *soid’, but the real invent is only to give the object au securty for. a dett ~ an when the *price’ Is cmparetively small - there really is @ contract ¢f loan, wlth an “equitable “Mertgege' (Art 1802). BARTER — a contsict’ whereby one person ‘wansfers. ownership cf noefungibte things. to another with the ob!iga.ion on the part of the later te-gve things ef the sums Kea, quelly and quantity (Art, 1984). DEFINITION OF FUNGIBLE: 1, fungidle ~ thos@ hich belong to cummon genus which Inchites several specs of the “game kine! (6.9. grein, wine ol) 2. non-fungible = those’ that are specifically determined and cannot be substituted by others (e.g. specie Jand, bulldlag, particular house) FUNGIBLE AND NON. ‘Commodatum / Mutuumn and Barter Distir quishod Re Pe [Subject matter is money] Subject matter Is non- emer mates money] sue! ater ton fan. iad in commodaturn, tha] The thing wih | jballee Is bound to retur| equivalent value is the identical thr given tr return tor what SS fae ery wt Multum may ‘bal Onerous, actually a jgratultous avd) mutual sale icommodatum Is always (et a OF PAYMENT: It thing leaned Is. 10rey = payment must be made In the cunéney stipulated, othorwice mat whic: {8 jegel tenaer in the Phiopines and in case of ixtordinaty inflation or deflation, payment hall be fr the valua of the currency’ at thd'titie 9: the creation of tie obligation. 2. Ifthing loaned is otier than money = paym:nt fof another thing of the sams kind, qualty and ‘quantily, In ease it Ls Impossible to do 86, the MEMORY AID IN.CIVL Uw] 231 borrower shal puy ls value et the time if tho perfection of theloah, REQUISITES FOR. DEMANDABILITY OF INTEREST: (LEW) ‘ust be arpresily stipulated Exceptions: a indemniy for dameges ._ interest neoruing from unpaid interoat 2 must be fovciul 3. tho agreement must 84 in wring ; COMPOUND INTEREST General ruts: Unpaid lAterest sha not sain interest, : Exceptions: 1. when judicially dethanded 2. when theie isan wxpress stipulation (must be in writing) GUIDELINES FOR’ THE APPLICATION OF PROPER INTEREST RATES The rules for the imposition ef interest cates: 4, Stipulated rate shatl apply, 2 When an obligation, regerdless of ks source, Is breached, tha contravenor can be held liable for camages, 3, With regard to an award of interest in tho concept of damages, the rate of intevost, as well a8 the accrual thereof, is Imposed, ac folows: 8, Whei the obligation breached consists of payment ef A tum of money, in the absbnce of an agreement, the tals shall be tho loca’ rate computed from default Note: Tha Interest ove. shall teal oun Ee it Is judicioly 3868, nteroot abst & recites annum. 9 OB Hi___232.|2009 CENTRALIZED BAR CPERATIONS Lines ¥. CA. GR No, 97452. July 12, 1994). Note: Central Bank Circular: No. 418 fixing the rate of interest al 12% per annum. deals. with loans, forbearance of any money, goods or ‘redits and judgments involving’ such loans, of forbearance in the absence of express agreeincnt to such rate CENTRAL BANK CIRCULAR NO. 905 (DEC. 10, 1982) SUSPENDED THE USURY LAW, + If the obligation arises irom other sources Such as contract of sale, damages a.ising from injury to persons and loss of property, and actions arising from unpaid Insurance claims, what is applicable is the rate of 6% annually es provided in, Am. 2208 (Terminal Facities and Services Corp. v. PPA, GR No. 135699. February 27, 2002), + Interest as indemnity for damages Is payabie only in ease of default or non-performance of the contract. As they are alstinct claims, they Imay be demanded separately (Sentinel Insurencey. CA, GR, No, L-52482 February 28, 1980), VALIDITY OF UNGONSCIONABLE INTEREST RATE IN A LOAN + The Supreme Court said that nothing in said clcular suspending the Usury Law grants lenders authority to raise interest cates to levels which wii either enslave thelr borrowers or lead to a hemorrhaging of their ‘assets (Almeda v. CA, GR No. 113412, Apri 17, 1996), + In Medel v. Court of Appeals, (GR No. 131622. Noveniber 27, 1998) It was ruled that while stipulated interest of 6.5% per month in 2 loan is not usurious pursuant 19 CBC No. 805, the same must be equitadly reduced for being iniquitous, unconscionable and exorbitant. it is contrary to morals. !t was reduced to 122% per annum in consonant with justice and fairpiay. + When the agreed rate is iniquitous and unconscionable, the courts may reduce the same as reason and equity demand. (Imporial ¥. Jaucian, G.R. No. 149004 April 14, 2004), The interest may also be reouced if tha principal “obligation nas been paitially performed, RECOVERY GF UNSTIPULATED INTEREST PAID 4. Pal by mistake «the debtor may resover as jn the case of solutio indebiti or undue payment 232 San Meds College of Laty 2. Voluntarily paid ~ no recovery as in'the case of raturel obligations ‘A conlract constituted from the moment a person receives a thing belonging fo another, with the | Cbiigation of safely kaeping it and of ratumning the same, i PRINCIPAL PURPOSE: SAFEKEEPING. If the safekeeping is no! the princiole purpose &t may be cither: 2} commodatum, b) lease or c) egency + The depositor nzed not be the owner of the thiig deposited because the purpose of the contract is safeceeping and not transfer of ‘ownership. The dapositary cannot dispute the tile of the dusositor (Ar. 1984(1)). The depositary is In estoppel (Art. 1436), The depositary carnot make use of the thing doposiied, EXCEPT in two instances: 1. wien there is 21 express permission of the depositor * or j 2 wihen it is necessary for the preservaton of the thing coposited (Art. 1977). i + Acontract of deposit may be a.ade orally or in witing (Art. 1968) CHARAGTER'STICS: 1. Real Contract ~ perfected by the delivery of the subject matter. Where there has been no delivery, there is merely an agreement to ‘leposit which. however is Singing and + ‘enforceable upon the parties, i 2, Unilateral = when gratuitous because only the depositary as an obligation : 3. Bilateral ~ if win, compensation because t onesn Beda a of Baty inane [Generally ae Te can Kexcent by mituall compensation agreement. Deposit snd Cot modatum Disting ishad pace STC Purpose 's Safekee}ing | Purpose is the transle of tho use “Tessentislly aad aiveys oe grotuitous Movabie/corporeel Both movabie and Ithings only in casa of] immovable may bs th [extrajudicial deposit Hl May be gratuitous KINDS OF DEPOSIT: 4, dudietal (Soquertmatio.) ~ takes place when an ailachment o seizure of property. in Migatior. is orders, 2. extra-judicial 3, Voluntary ~ dstivery Is made by the wil of the depositor or by two oF more persons cach of who betieven himself entitled to the thing deposited. (Arts 1968-1995) b. Necessary — nade in compliance with (1) a legal obligetion, or (2) on oczasion of any calamity, or (8) by travolers In hotels and Inns of (4) by travelers with common carters, Note: © Another differense batween 2 voluntary deposit and a necessary deposit is that In the former, the depositor Is free to chouse the depositary, n tne latter, there Is lack of free ‘choice in the depesitor. ‘+ Bxtra-judicial ss0sit does not include Ingorporeevintany ble proserty such os right and actions for i fotows the oerean of the ‘owner let and Etra-uoia Deposit Dist yc arly 0 property of] Custody nd econ case of |Upon order ef tis court {Pe Person whe has. right | MEMORY AID IN CIVILLAW] 233. Uipon demand of (or when litgatior.is Sar aie Rane Deposit is NOT Gratuitous In the following: 4. when there is @ stipulation 2. depositary Is ergagad In business of storing ‘goods 3. property saved from destruction without knowiedge of the owner Noter + Ifthe deoostary is capacitated, he is subject to all the obigaticns of @ ceposilary whsthar ‘or not the depowitor is capacitated. + On the ober hand, tho Ineapactoted depositary does not Incur the obligation of a depositary, However, he Is able to 2. return (hs thing daposited while stil in his possession; and 2 pay he dponit te amon by wich no may have benetited himself with thet rite price eubject to tne right of eny tid person who enquired the thing in good faith OBLIGATIONS OF THE DEPOSITARY: 1, To keop thn thing safely (Ar. 1972) Rules: © He Is ladle ifthe loss occurs through his fault of negligence even if the thiny is Insuved © The toss of the thing while in his possession, ordinarily raises the presumption of fault on Nis part © The roqulred of care Is greater it Bethe person the latter is234 |2009 CENTRALIZED BAR OPERATIONS © Legal representative of the depositor should “the letler subsequently tore his capacity during tive deposit. (Art, 1288) Time of Return: General rule: Upon demand even though a specified periog or time for such r2tum may have been fixed Exceptions: when the thing is judicially attached while in the depositary’s possession; o b. should he have teen notified of the ‘ppesition of a third person to the returt ‘of removal of the thing deposited In such Instance, the depositary must immediately inform the depositior of the attachment or opposition. (Art. 1908). + if ésposit gratuitous, the depositary may return the thing deposited notwithstanding that 4 period has been fiyed for the deposit if justifiable reasons oyists for its relur. If the depositor refuses to receive it, the depositary may. sesure its ‘consicnation from the court, + If the deposit is* for a valuable consideration, period must be’ fovlowau even if the depositary suffurs inconvenience as a consequence (Art £989) essions of the thing deposited (Art. 1983) b. If hy force majeure o government order, the seposilary foses the thing, and fecolves money or another thing in ‘ts place, he shall deliver the sum or other thing to the depositor, Where io return: 1, place agreed upon by the parties, or . at the place where the thing depositad might be even iff should not be the sane place where the deposit was inadu provided. there was no malice on the part of depositary. (Art. 1987) Not to deposit tho thing with 9 third person unless authorivad by expruss Stipulation (Art. 1973), Reeson: ceposit Is founded on tr confidence The depositer is liable for the loss under the following: 2. He transfers the deposit with « third pergon witncut authority, although there is San Beds College of Lary 19 nogligence on his part and the third person; b. He deposits the thing with a thied person’ who is manifestly careless or. unfit, aithough euthorized, evan in the absence ofnegiigence; or The thing ig ost through the negligence of his employees whether the latter are rmanitestly careless or rot, 4. To change the way of the deposit if under the circumstances, the depositary .may teascnahly presume that the depositor wouid consent to the chauige if he knew of tho facis of the. situation, provided, that the former notifies the depositor theraof and wait for his daciston, unless dolay would cause danger (Art. 1974) If the thing deposited should earn interest (Ait. 1975: a. to collect interest and the capital iteelf as Ital cue; and b. to taka steps to preseive ite value and rights with yagard to it Note + A rontrac! for the rent of safely dopost boxes is @ special kind of deposi; hence, it Is not 1 be stctly governed by the provisions on depos The relation between a bank and iis customer Is that of 2 ballor and bat, the kailment buing for hire and matual bent * It cannot be. characterized as an ordinary contract of lease. because full and absolute corirol of the eafety depos boxes was not givan ta the joint renters (CA Agro v. CA.GR N>. 90027, March 3,San Beda Colleze of Hato b, When authorized by the depositor ithe authorizeticn shall not be presumed and iis existencs must be proved) Effect I permission te use Is given: a. If the thing deposited Is non-consuniable, tha contract Is a commodatum, unkeis safe-koeoiit' Is stil thé principal purse, W the thng deposited conrisis of colrsumable: things, ths contract is converted Jno a simoia loan or mutuum Unless safcldeping la atik the princizal purpot’s in which o1s6 ft is called an lrregular coposit (Exempla; bank oposits), pelt 1nd Mutuum Distingt tehod b. Irreguine Do} Raion! TRON {The consumanie. tag! The. lender earinot Jdepcstted may bs! demiand restitution unti idemarided st wil by| the time for payment. as the depositor. provided in the coniract, [The only benefit is Wai) Ess oause ha *|which accnies to ‘dj transaction — i idoposttor. necessity of the PEE __._|berewer |The ireguisr deposit | Common erediors enjoy has a preference o¥%| no preference in tne other creditors wth] distbutien ofthe Fespect to the thirg| debtor's property. ideposited att ee 4, To be fiable for toss through fortuitous event (Art, 1979): (SUDA) a. Hstipulated . b. if he ses the” thing without the depositors permission ©. Ite delays its return 4d. ifhe allows cihers to use it ‘When the thiny deposited is delivered snaled and cloned (Art. 1867): a. to return the thing deposited in tha sane ‘condition (per, 1); to pay for damages should she seal or Jock be broken through his aul, which Is presumed uriess proven otherwise (par. Band to keep the sécret of the deposit when the seal or lock I broken with or without his fault (par. 3) b. Note: The dapositary Is authorized to open the thit) deposited which Is ciosed andl seaied wten (Art, 1962): |. there is presumed authority, oF MEMORY AID IN CIVIL LAW! 235 li. tare in necessity to ¥2 so 19.To pay interest on sums converted to personal se If tho deposit consists ot money (At 1283) 00000113 Note: + Fred, samnga. and current deposits of money In banks end similar institutions ‘shall be governed. by tho provisions cononrring simple loan (Art 1980). A bank ca compensate or sot off the deposit in its hands for the payment of any indebtedness to iton the part of the depositor, in ue deposit, uci compensation or set-off 1s not alowed 14, To advisu tho trie ‘owner that a deposit has bean made: should ho discovor that the thing doposited wes stolon from tho owner (Ait. 1924) 8 If the owner’ despite such’ information doos not’ clalni It within: te period mantn, the depositary shall be reliuved from al responsiblity by returning ti sarhe tu the depositor Rule when thorn ate two or more depositors: “4, ‘Thing eprsited 1s: divisible. and depositors are not solidaty:' Each depositor can demand only hle proportionate share thereto, 2. Obligation is solldavy ori thing Is not divisible: Rules on active solidarty shall apply, Le. each ene of the solidary “depositors ‘may do whatever may bo useful fo the othera but nat Anything wtich may be preludical to the lattor (Art, 1272), nd the depostiary may roturn the thing to anyone of the solidary depostiors Uniese a demand, judiclal or excrejudicia, for ite rot ? ne of thar In At, 12h) PR NGG fyer in case AE (Art, 1991)236 12009 CENTRALIZED BAR OPERATIONS. OBLIGATIONS OF THE 2 EPOBITOR: 4, To pay expenses for precarvation {contemplates ordinary aid extraordinary necessary axpans2s) 2. Ifthe deposit is gratuitcus. the depositor is obliged to Feimburne the depostary for expenses incurred for the preservation oF ‘ne ting deposited (Art. 1992) b. it the deposit is for valuable considaration, expenses for preservation fare bore by the depositary untoss thero is @ contrary supuiation 2. To pay loses Incurred Ly the depositary due to the character of the thing deposited General rule: The depositor shall relmburse the depositary for any less avsing from tne character of the thing depositen. Exceptions: 2. Atthe time of the deposit, the depositor was not aware of the dangerous cheracter of the thing) b, when depositar was not expected to Know the dangeraue character of the thing ©, when the depositor nolified the depository ofthe same; or 4d. Tha depositary was aware of it without edvice from the depositor. Extinguishment of Voluntary Deposit 4, Loss or destruction of the thing deposited 2. In case of gratuitous deposit, upon the deati: cf elther ihe depositor or the cenosttary (because a gratiitous deposit 1s a persona contract) 3, Other causes, such as return of the thing, ovation, merger, expiration of the teim fulfilment of the resolutory condition, ete. {47 123%). Nocessary Daposits 4. Made In compliance with a legat obligation 2. Made on she occasion of sny calamity such as fire, storm, flood, pillage, shipwreck or other simliar avents (deposito miserable) 3, Made by travelers in hotels and inns 3. Made by wavelers with common camiere Deposit by Travelors in Hotels and tnnst The keepers of iotels orinns shel! ba rasponsitie as depositaries jor the deposit of effects made by ‘avelers provided: 4. Notice was given to them or to thei employees of the effects brought by. the guect; and The guests take the precautions which sais hotebkeepers or their suestitules covised Sau Beda College of Lay Telatva to tho care and viglence of their wae y | This lao ups to. copesis. made to cominon ccerrigrs (Art, 1754) Note: Liability extends to. vehicles, animals and articles which have been introduced or placed In the ennexes of the hotel When notel-keeper lab: injury is caused: 1, by his servants or employees as well a8 DY - strangers provided that the notice has been ‘given snd proper pfecaulions taken; and by the act of a tlef or robber dorte without the Use of arms and lrresistiole force, for In this case, the hotel keeper is apparently negligent, When the loss oF When hotel-keoper not liable: When the (oss or Injury is caused by 4. force majeure, theft or robbery by a stranger with the use of'arms or iresistible force; 2, the acts of quests, his family, servants ‘or visitors; oF 3, arises from the character of the things brought into the hetet Note: + The hotel-eeper cannct free himself from the responsibilty by posting notices to the effect that he is nct foble for the autic’as brought by the guest, Any stipulation to such effect hall be void. + Notice Is necessary only for suing civil ality but not in criminal iabilty. oe a Us ‘contract, hagabitaxearne{quarantor) binds cat to ig je othe ycipal dist Se to do savy SAN BEA JON SRP RARALIN gg a a Afon Bede Colleg? oC Law . As to Consider toi Gratutous + the uarantor dons. not ‘receive anyth ng fot acling as such. b, Onerous "=! the < guarantor receives valuable con eration. , As to the Person Guarantéod ‘ a, Shgle — oie constituted solely to Guarantde or Secure pertormence by the debtor of 6 pticipal obligation b. Double or sut-guaranty ~ ona constituted to secure tu fulfiiment by the guarantor ofa priongueraniy 5. Aa to Scope ancl Exiont & Definke = tha euaranty Is limlied to the principal obligation only, er to @ specific portion thersy. b. Indefinite ct Ample = one which not only Includes tte f.rincloal obligation but else all ts sececa les including judicial costs SURETYSHIP ‘A contrac: whereby tne person engages to be answeratlo for the dt, default or miscarriage of tho principal Note: The referenet. in Ar, 2047 to coldary cbiigations does no: msan that suretyship is withdrawn trom . 3. applicable provislors joverning guaranty. * surety is almost the aama 8 a solidary debtor, «except that he himself is a principal debtor although the contract batyoon him “anc. the eredilsr is only an acce:ssory contract. Nature of Suroty's Undertaking: 1, Liablity Is commactual and accessory but 2 atrect. Note: He directly, srimarily and equally binds himsetf wit the principal as original promisos, although he possssses no direct ur personal inferest over the iotler’s obligation, nor does he receive any benefits theretrom (PNB v. CA. GR No, 32474, July 4, 1991. 2, Llablity Is timited by the contrac. 8. Usb arisee ony 1 princint debtor a ablo, Note: (+ Tho ‘creditor may sue separately or together the principal debter and any of i the sureties, = +I the absenes of cullusion, the surety is bound! by a jurlarsent against ths principal ‘even though 18 was not a pany to the “proceedings... The: natura. of its undertaking’ t1éRs ‘:It,.crivy 10 ll | aoaeedlateagalnat if pinion (Phan “Goneral: Assutancs. Cort.”¥. Salk. GR “ho, es0t4, Augut 20 1990 4 Surety Is rot, éntitléd, to, the. benefit. ot exhaustion 8. Undertaking is to the creditor and not te debter. 6, Surety Is 10: ented to notice of principal's dofauit, 7. Prior demand by th creditor upon principal ts not required. Note: As soon a6 the prineipal is in dofaul, the sureiy likewise isin default.” 8. Suely i netexnnerated by neglect of eodior fo sue principal... 3 Characteristics of Guaranty and Surotyship: Accessory ~ It carnot exiet by itself and an indispensable condition fer lis constitution fs the esisteres of a valid principal obligation, Note: Guaranty may be constituted to quarantea the purformanne of a voidable or tunenforcaable contract It may alae guaranteo a natural obigation (Art, 2052), 2, ‘Subsidiary and Conditional ~ lakes effect only wher: ihe principal deistor. fails In is ligation, subject to limitation Note: +The. guerantor cannet bind himself for ‘mote than thy principal debtor anc ever if the does, hie lability. shall be reduced to the limits of thot of the debtor, Gut a guarantor may bind himself for loss than that of the principal (Art. 2054), ‘+ Aguaranly may be given as security for future debls, the amount of which is not yet known; thera can be no claim against the guarantor until the debt is liquklated. A. candtions! obligation may algo be securad (Magdalena. Estates inc. ¥. Routiguer,” \G.R. No. L141, 17 Dovemior 1980). 2% neta even wio to ia orn which case spol) guia pives rise zayen eine the pag Giine Rptance.. With tor; «no stich MEMORY AID IN CIVIL LAW] 237. “aT238 |2009 CENTRALIZED BAR OPERATIONS 40, requirement is needed because he biids himself to nothing, + However, when there is merely an after of @ guaranty, or merely a conditional guaranty, in the sense that it requires retin by the creditor before the obligation becomes fixed, it toes not bbacame binding untl itis (f)sccepted and (Qhuntt notice of such acceptance by the Greditor is given to, or acquired by, the guarantor, or unt! he has notice. of knowedye that - the creditor has, performed the condition end Intends to act upon the guaranty. + But in any case, "the creditor Is not precluded from waiving the requiremant of police + The consideration of the guaranty is the same as the consideration of the principat obiigaiion + The creditor may proceed against the ‘quarantor although he has no right of action egainst the principai debtor. + if guaranty Is entered into without the imowiedge or consent or against the wit i the principat debtor, Arts. 1236 and 4297 shall epply (Art. 2080). + Att, 1236 (par. 2) — whoever pays for another wlo the consent or against the will ofthe debtor can only recover only. insofar as the payment was beneficial to the debtor, + Ad. 1237 ~ whoever pays on behalf of ihe aebtor wo the latter's knowledge or against his consent, cannot compel the creditor to ssubrogate lo him in ni Not presumed, it must be expressed end reduced in writing. Falls under the Statuto of Fratds Sircty interpreted against the creditor an! in favor of the guarentorisurety and is not to be extended beyond Its terms or specified limit (Mogdatena Estates inc. v. Rodriguez, G.R. No, L-18411, Decamber 17, 1986). The rule of strictissin juris commonly pertains to en accorimodaticn surety because the leit acts without motive of pecuniary gain and hence, should bo pratocted against Unjust pacuniary impoverishment by imporing on the prinuipal, duties akin to these of a fiduciary. Note: “it does not apply in case of compensated sureties. ‘Svarantor must not be the principal debtor. Excaption: in a real guaranty, ike pledge and morgage, a person may guarantee his on obligation with his personal or eal properties, (Dan Beds College of Lato ‘Surety ‘assumes | independent agreement liability ae reguiar party | to pay the obligation ij to the undartaking. primary debtor fils to do fs [Collateral undertaking | Surety is an orginal L. promiser. (Guaranier is secondarily] Surety 's primarily liable. abie. [Gveantor binds fimsell Surely “undertakes, to to pay if the princikall pay I the principal CANNOT PAY. DOES NOT PAY. Insurer of solvency of] Insurer of the debt \dedtor Guarsnior ean avail off Surely cannot avait of ithe benefit of excussion| the Feneft of land division i case! excussion and division, creditor proveeds| against hire. ‘Not hound to take notice! Held” to know every lof tne non-perforrarice| default of his principal lof his principal [Ofien discharged by the| Not discharged by |rere indulgence of the) mere indulgence of the |ereditor or want of notice| creditor or by want of jof default notice of defauit Indorsement and Guaranty Distinguished TERRES Primerily of te | Contract of security Unless tho note | Feilure in either or both promplly presented fcr] of these paitlclars payrent at maturity and| does not generally absolute | of Ak clscharog togt oRpERSs sq eeeSan Beda College of Law Guaranty aiid Yartasty Distingu'shod BSUS | i Wiel ie ues es IA contract by which ai An undertaking that the person Is bound te] tie, quality, o1 quantity | anothor for the fulfllaant| ot the subject mattor of lot a promise. ar| the contract In what it lengagement of ititd| has eon represented party fo be, and relates to tome agrezment inade ordinary by the party who makes the + Warranty +A guaranty ts (ratutovs, unless thers is 9 stipulation to the contrary. The couse of the contact {8 tho aime cause which supporta {he obligation as to ha principal debter. © The peculiar nalira of a guaranty or surety agreoment Is that it fs regarded as valid despite the absence of any direct consideration recsived by the guatantor or surety olther from the principal debios or trom the creditor, & ronsideralion: moving to the Principal alone wil eu‘fce, Double of Sub-guarinty On constituted to guarantee the obligation of a guarontor bea * In case of insolvenicy of the guarantor for whom hs bound himself, Is responsible to the co-guarantors in the sane terms us the quarantor (Art. 2075}. Continuing Guaranty or Suretyship Not -limied. to a,..single. transaction but contemplates a future course of deaiings, covering a serles of transactions ganerally for an Indefinite time of until :evoked Note: Exception to the concept of continulng guaranty 18° 4 chittel. morgage. A. chattel Mortgage can. only ct ver obligations existing a the time tke mortgage js constituted ond not thove contracted eubsequest to the execution thereof (Belgian Catholic Misslanaries, Inc. vs. Magallunes Press Ine, et: al, GR. No. 25729, November 24, 1926). However, ati excertion to this fs Ir czse ef stocké In deparimont stores, drug stores, ete. (Torres ¥, LinJap, GR. No, 34368, Soplember 21, 1931). > Extori of Guarantos’s Liability (Art. 2055) + Where the guaratrty définte: It Is limited in whole or in part ‘x the principal debt, to the exclusion of accbsvories. + Where guaranty iicdefinte or sinplu: It shall Comprise not ony ‘he principal obligation, but nee, MEMORY AID IN CIVIL LAW| 25: also all i's accessories, Including the judieiai costs, provided wlth respect to thu later, that the guarantor shal only be lable for thoae costs insured ufter he Has been judicially ruquited t6 pay, Quailfications of @ Guarantor (Arts, 2056-2057) 1. possessor intayrity 2. capanity to tind himseit 3. has sufficient property to answer for the obligation which he guarantvcs General rule: The qualifications need only Le present et the tina of the perfection of the contract. : Exception: wiva the guérantor 1s selected by the principal debtor because the lattar answers for the solvency of the former, in this ctise tho guarantor must possess the quslifeations. presciihes not nly at tie moment the guaranty Is given but also ‘until the extinguishment of the debt. : Reason: remamber that a guoranty is for the benefit of the creditor not thd debtor Effect of subsequent loss of requirad qualifications: The’ subsequent lass of the Integrity of property or supervening incapacity of ‘the guarantor, would not operate to exonerate the guarantor: or the,” eventual kabilty he has Sontracted, and “the contact of queranly continuas. + HOWEVER, the cteditor may demand another guarantor “with the reper qualifications, But he may walve' it if ho cchooss srr ‘hold the, guarantor to his bargain i 2 compalod,240 |2009 CENTRALIZED BAR GPERATIONS Note: + Not plicable toa contract’ of suretyship (arts. 2047, par. 2; 2089,2)) * Cannot even begin to teke place cefore juidgment has been obtained against tne ‘debtor (Boyion v. CA. GR No, 109941.August 17, 1996) When Guarantor Is not Entitled to the Benetit of Exoussion: (PAIRS-BIPS) 1. IF it may be presumed that an exectition on the property of the principal debtor would not result in the satisfaction of the obligatien ° Not necessary that the deotor be judicially declared insolvent ar bankrupt When he has absconded, or cannot be sued within the Philippines unless he has left a manager or reprasentative 3. in case of insolvency of the debtor + Must be actual; proven by unsatilled ssrit of execution. 4, The guarantor has expressly renounced It 5. If he has bound himself goldarily with the debtor Ihe 1s 2 judicial bondsman or sub-surety It he fails to Interpose it as a defense bevere Judgment is rendered against him 8. If the guarantor does net sot up tha benefit against the creditor uper: the latler’s dersana for payment trom him, + Demand can be made only after judgment on the debt iané-must be actual; joining tne guarertor in the suit against the principal debtor is not the demand intended by ‘ew 8. Where the pledge or mortgage has been given by him as special security Benefit of Division (Art. 2085) Should there be several guarantors of only one dedlor and for the same debt, the obligatiun to answer for the same Is divided among all, General rule: Joint Lietilty Exceptions: 1. when solidarity is stipulates; oF 2. ifany of the circumstances enumerated in ait. 12069 should take place Right to Contribution of Gucrantor who pays: may damand of each of the others tho share which is proportionally owing from him + If any of the guaranters should be insolvent, his share shai be boms by the cthers including tho paying guarantar in the came joint proportion, + Tho above rule shall not be applicable unlocs the payment has been made by virue of 2 240 _ Som Bede College of Lato {udicial demand or unless the principal debtor is insolvent. ; Accrual/Basis of Right: acquived ipso jure by Virtuo of sald payment without any prior cession of rights to such guarantor Defenses: The co-guarantors may set up against ¢ une who paid the same Gefenses which have pertained to the privipal ‘debtor against the ‘redior and which ate not purely personal to the debtor (Art 2074), Procedure When Craditor Sues: The guarantor cannot be sued with his principal, much less alone except in Art, 2089. 1. Notice to guaranter of the action ‘+The guarantor must be NOTIFIED, + If the guarantor appears, he is still glven the beneft of exhaustion even if judgment should be rerdered against him and the principal debior. Voluntary appearance does not constitule a renunciation of Tigi to exeussion [see Art. 2055(1)}. + Guarantor cannot set up the defenses if fhe does not appear and it may no longer bbe possible for him to question the validity of the judgmet, 2. A gueranior Is entitied to be heard before execution can be issued against him where + he Is not a party in tie case involving fils, prricipal (procedural due process). Remedies of Paying Guarantor 4. Right of indemnity or Reimbursemerit 2, Right of Subrogation Guarantor’s Right of Reimbursement Indemnity — orBran Heda College of Maw 3, Expenses ino ved by the guarantor after having nottiot the debtor that payment has boen dynended of him by the creditor, only these, expenses that the guarantor hat to satisly In uiccordance with faw a3 a. caneaquenca of te quaranly (Af, 2045) not these whieh depend upon HS wil or own acts or his fauit for these ure his exclusive personal responsibilty ind fs not just thal they bs shouldered by L7e debtor 4. Damages if thiy aro dua in aerordance with law, General rules on damages apply. ‘ Exceptions: 4, Where the guaranty’ is constituted without the knowlege or agair st she will of the principal debtor, the guarantor can recover only insofar the payment hud been beneficial te the debtor (Art, 2050) 7 2 Payment by @ third person who does not Intend to be felmtursed by the debtor is deemed to bs a donation, which, however, Fequites the debisr's consent. But the payment is In any cr-8e valid as to the creditor Who has acceptod It (Ad. 1298), 3, Walver 0° the right te: domand reimburserient, Guarantor's Right to Subrogation Subrogation transfers tc the person, subrogated, the eredi: with all the iighle therato appertaining either against the debior or againet third persons, be they guarantors of possessors of mortgayes, ‘Subject 10 stipulation in conventional subregation. Note: ; + This rignt of subtegotion is necessary to enabie the guaranicl to enforce the indemnity ‘ven in Art, 2068, + IRerises by oparatict: of law upon payment by the guarantor. It If not necessary that the creditor cade to the guarantor the former's rights agalnst the detstor. + Ii not @ conigasual right, The right of {Quarantor who has [paid u debt to subrogation does not stend up contract but upon the principles of natural justice, + The guarantor Is stivagsted by virtue of the paymont o the rights ofthe ereditor, not those of the debtor. + Guarantor “cannot éxarcise tne right of Fedemption of his principal (Unutia & Cu v, Moreno, et ul, G.P, No. 8147, October 26, 1914) f + IF the guarantor peid & smaller amount by Witue of @ compromisa, ne cannot damand more than he actualy paid, _MEMONY 10 IN CIVIL LAW) 241 Effect uf Paymonthy Guarantors 1. Without netiva to debtor. (Art. 2060)! Tho debtor may inlerpose against the guarantor those defonnos whit lie could have sel up against tne cradow at the time the paynient ‘a9 mace, on the debtor cun eet up against Wwe. gvaranter the delense of previous ceatinguist ant the obligation oy payment 2. Befoie Maturity: (Art, 209):. Not entiiod to reimbursa:nwent Unless. the payment was {aaile will he gonsent or has been ratified by the deblor (Ratfication may be exprass or implied) Enect of Repeat’ Payment by Debtor (Ar. 20/0): “ Genera! rule: Datore guarantor pays the craditor, he must first notify she dotlor, otherwise the latter may 3€1 up defonses he ‘could heve: sel up against the creaitor (Ari, 2088). if he falis to givo such notice and the deblor repeals payment, the ‘Quarantor car: only collect from the creditor and guarantor has no cause of aclion against. the debtor ior the return of the amount paid by guarantor even If the ‘creditor should becom? insolvent. Exzeption: The gutruntor can stil elaira reimbursement (rota tha debtor in spe of tack of notice i the following) conditions are pinsont (PIG) 4. guarantor was prevented by fortuitous event to Advise the debtor of tne payment: 2. the creditor becomes insolvent; and 3. the guaranty is gratuttous, Right of Guarantor to Proceed Ayainst Debtor Bofore Paymont General rule: Suarentor has no cause of action against debtor unllater the-formor has paid the obligation hte Re ge ere ie 7 ptlons (Art. 2877): (SB. When he s.ued far payinent.-.. 2 Sthasivé: ‘arene tdi 3 i iiriselt Gitalave fjeweit to GiAteNID Wlthin BNSiFecition deninge " 4 nforidabl, 8 oahd ee ther fo fixoet Cry, f 0. anand fat etrrcire i ced 7. MBKigh lor inhi Rise gdngdybtivacesaing a S Note: Ant"2D9V0y enpilicablafANeeevallabie to the surety (ManTaaSMBWrReAyeo,, inc. vs. Bat Construction & 1353. May 21, 1957). Rr242 {2009 CENTRALIZED BAR OPERATIONS, Romodies_ of ALTCRNATIVE): 4. obtain release from the guaranty (can only be exercised against the principal debior) Reason: otherwise 't wit result’ in ihe extinguishment of the contract; or 2, demand a security that shall pretect him from any proceedings by the creditor, and-against the danger of insolvency of the debtor. guarantor (remedies are Aiolo 2086 and Article 2071 Dissiayuiahed ee antevea SiS a Provides for nel Provides fori foforement oft Agha} protection befor he | fof the guarantor/surety) has paid but after he against the debtor ater| Ras become fable | nehas paid the debt | (Gives 8 right of action] Protective after payment before payment Substantive right Preliminary remedy remedy Guorantot of Third Person at Requost of Another (Art, 2072): Guarantor may demand payment from: 1. person who requested him fo be @ guarantor, 2. debier. Extinguishment of Guaranty: (RA2CE2) 1. Release in favor of one of the guaraniors, vathout the consent of the others, benafiie all to the extent of the share of the guarantor to whom ithas been granted; 2, IF the creditor voluntarily accepts Immovable ‘or other properties In payment of the debt, even if he should afterwards tose the same through evietion or conveyance of rropeny: Effect of eviction: Revival of principal obligation, not the guaranty 3: Whenever by some act of the ereditor, the guarantors even though they are salidarliy fable cannot be subrogated ‘o the sights, mortgages and preferences of the former, 4, For the same causes as ail other obligations under Art. 12345 5, When principal obligation Is extinguighed; 6. Extension granted to the debtor by the craditor without the consent of the guarantor, Exceptions: Creditor cid not collect from 3rd persons obligations payable in installme ‘waiver by guarantor extension granted by creditor on tond extension granted t0 firsttler otligors cannot partles San Beda College of La Bend ‘An undertaking that 1s sufficiently, secures not cush or curlency and Bondsman ‘A surety offered In virtue of a provision of law or & judicial order. He must have tha qualifications Fequited of a guarantor and'in special iaws tke the Rules of Court. Note + susiciat bends constitute merely @ special Liars of contracts of guarenty by the fact that they are oven “in vitue... of ajwieial créer.” 4 ji the person required to give a legal or judicial bond shoule not be able to-do £0, @ pledge or mortgage sufficient to cover tha Doligation shall admitted in few thereof (Art 2083) 3 + A jusicial pondsrian end the sub-surety ere NOT enliled to tie benef of excussion hecause they aré not mere guarantors, but suretios whose laity Is primary and solidary (art. 2084) COMMON — ELEMENTS | OF MORTGAGE &ND ANTICHRESIS (Arts, 2085- 2092) PLEDGE, 1. Essential Requisites (Act 2085) (SD) je gecures. the fulfliment of = pencipal oxligation; 2, Pleagor, mottgegor, antchretic ‘debtor ust be the sbsclulo gener of the thing fledged or mertgaged; and Biedger, mortgagor, antichratle deblor rusty es cf thelr property, oa Bion purpose, R a and ae ‘niisipalldn ot BUghes\agure sale Te aceaae rial with geeprincipal obligor Pee only to the property should there be any but his iBan Reba College rt Rew deficiency, the c’ediiur has recourse on the rinclpal debtor. v1.0 remains to be primerly bound. +The law yranis 10 4. iaeicnininodation plerigor for morgagor the ssig rights as o quasantar and he connot be freludiced by any walver cf defence by the pr spel debtor, 2 Prohibition Commissorium Stipulation whgrety tne thing used a8 souuity shail automatically becomes the property of Ine Creditor in the evert of non-poynient of the principal ovligation In cue time, Aqgaint Pavtuny Requisites: 1. ‘There shoul 39 pledge, mortgage, or antichresis of propor 2, There Is 2 stguletion for an automatic appropriation ‘Ly the creditor of the property In the event of nonpayment of principal obligation, General rufe: P3stum Commissortuns Is forbidden by law ond any stipulation so that effect is declared mit and vold, Reason: te amoun’ of the loan Is orainarily less than the real value of the thing cledged ‘or mortgaged. Exception: The pledgeu may appropriate the thing pledged if after the firat and second auctions, the thing is not sold (Art, 211%), Tha Creditor shall be obliged to acquittance for his eniire clalm, This act shall be considered a9 full payment of the claim, Note: Only the prohibited stipulation is void and shall not affect the valelty of te prineipel obligation, : M. Capabiity “to Frcure all kinds ot obligations (Le. pre of conditions) (Ar 2081) ™. Indivielbitity (Art, 2039), +A pledge, moryiag6, oF anticnrecis Is indivisible, avennaugn the debt may be divided among ti.2 nuccaasors in interest of the debtor of vthe creditor. > Thai, indivisibhty jw" not: effected by the fact. that thé “dy st6r¥ /af6 Jointly. or not soldarily table" Note: Neither the debtor's heir who has pai art of the debt cin’ bt ask for proporionat extinguichment,. nor. creditor's. ele whe MEMORY AID IN civil LAW| 243 Weelved his share of the debt return the pledge or cancel tha mortgage 29 long as the debt is not cureplotely salisied. Gonorat 1ufe: The mete embodiment of areal morgage and. a'‘chattel_morigage’ in. one document does not have the effect of fising both sncuritiag into an indivisible whole, both remain dlsinct agreements, Exceptions: 1. Where cach one. of “several things ‘quaranters @ determinate portion of thie credit 2. Where onl a portion of the loan wis releases 3. . Where there was failure of consideration 4. Where thant is. ne debtor-croditor relationsinp av when a thitd party is’ the pledgor or mortgegor Note: The mortgages may legelly foraclose the real esiate mortgage oxtrajudicialy and waive the chattel mortgage foreclosure, and maintain iistead a personal netion for the Tecovery of the unpalt balane of the credit (Phil, Bank of Commerce v, Macadaog, GR No L-14174, October 31, 1960), V. Possession of an antichratie croditor, mortgages or plodgee Is rot in thy col:cépt of an owner and thus the subject Property cannot be acquired through prescriptive proscription, UNLESS, thoy renormce thelt status as such, VL Plodgor, mortgagor, antichretis debtor rotains ownership of the thing given as a awcurlty, FoF tow third peyson a. mevbyhy or int evidencing Inberpoteal right ‘Seqprzig’ fulhiment. OF ida tng bn. vel atu eslak Ri, REQUISITES YAO! essen EDs 1 Ropsion of te RYirnust be Kevetio e wy porson by 209: . ié equines nO Heperise piedga i prsseusion Is ah of 2 lien Er244 12009 CENTRALIZED BAR OPERATIONS Sau Beds College of Law 2, Subject Matler: movable property and incorporeal rights evicenced by documents of ees litle “end the instruments proving the sight r \ pledge shal be deliver tobe coor, nd Todcenes tite W negotiable must be endorsed (A 206); faws of the thing Not to demand the retum of the thing | until after full | payment of the | debt, Including 3. The description of the thing pledged and the date must appear in a public instrument to bind third persons, but not for the valisily of the contract (Art, 2096), Reason: to forestall fraud because @ debior Impakment of thing without tha Pledgee's faut, subject to the duty al ‘eplscement “ interest gue man atemgt to conceal fis property: by e'pmager ts] thereen an | resonable expenses inured KINDS: ggounde to, four! forts preservation contract thing pledged 2 Loyal exes by persion of iw oe i (Gramples fate 346, 1798 ane 14 NEC) fiige & Hledgse ote ‘another thing CHARACTERISTICS: whieh Is of the 4, Real contract ~ it is perfected by the gellvery n fame Kind a] ofthe thing pledged: qually “38 ie 2. Accessory contract ~ i has no independent ‘oemer existence ofits own 4 lodge does rot Exception: may guarantee the performance Shove Yo of a Voidable or unenforceable conlract or 8 natural obligation (Art. 2052) 3, Unilateral contract - obligation Is solely on the Fart of the crecitor to return the thing subject ereof upon the iulfllment of ‘he principal exercise his right to cause the thing] iy be S010 a public auction Note: The pledgee’s right to have the thing | 1, Conventional "i Voluntary -- created by | ‘nypaiiment of te! | i bligation; ana at pets. oale| 4. Substsary contrat = the obligation incures fronted uote oes rot arise until the fulilimant of the 2496 Is superior tothe principe! obligation which is secured, sight. granted uncer Extent of piecige: Uniess stipulated otherwise, | Art. 2107. f pledge extends fo the truls, interests OF) ay Serres atthe pay referred at Hie putic| auction 2 tah EEO A Peibbet esse esa waeSean fiedo College 23 Gee Powel Vaated ee 4, Option’ yt. demand feplacement «1 Immediate paymant of tha debt in case G deception as 1: substance «1 quatty 2 © remedies are alternative 2. To sell at publit auction in cat of reasonable grounds. v9 fact dentruction «1 impakmest ct tie thing withot his fault > |4, + this right 13 ' nore superior 1) the right given in An. | 8 2107. The proceeds shall bea security tor |8. tho principa obligation 3, To bring actions pertaining to the, owner orto defend tt against rd persons 4, To choose which ‘of sovaral things pledged sha b sold b 5. To collect “ahs racelve. -amouiit dua on.) creat plecned < 6, To -old”-at the public suction Uniags he Ie the only bidder 7. To appropza'e the thing in east of failure of the 2nd. puble auction : 8. To apply. salt fruits, ‘iteres!s: ot_earning} Take cars. of th thing yuh the diligence of ‘good father of fainlly and b a Habla for the toss or deterioration of such Not to use thin unless authorized or by in the ownar of Its precervat’on fequires its use Nat to deposit the thing with 3td- persor unless 8 stiplated 8 mn ° Respons'bilty for acts of ugen's ‘and empoyeas: 88 regards the thing To advige pledgor of danger to the thing To advise Fledgor ef the fosut of the public auction MMOny AIDIN CIVIL LAW| 245. } Wie ira,“ any, then to ths piinclpal ‘of the ered 19, To rela excoes vale eecalvnd | the pubic so joe ei thing “ui ater full puyenent ef the debt ie reinibureod fee the oxpenses msde “tor the praservailon of some thy preaga 12, To object w te allonation of the | tie 13, To poreess the | thing | 14. To sot at publie vation in’ case | af opment ! of debt at tary PROHIBITION AGAINST DOUBLE PLEDGE Properly which has boon lawtully pledged to one reditor.cannet bo pladged to another as long as the firt'one subsins, EXTINGUISHMENT OF PLEDGE: (CRAPSA) 4. For the sam? gauss 28 all other obligations 2, Return of the thing pledged by the pledge to ‘he pledgor : 3, Statement In waiting! by the pledges that he fenounces oF | xp the, pladge: 4, Baym (ne RN a EE ATRIe Acton i Aoerosnialoruntanatens2 1 il ear, a ee ‘ei mere mS246 |2009 CENTRALIZED BAR OPERATIONS tact of Salo ofthe thing Pledgad: ‘The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount fof the principal ooligation, interest and ‘expenses in a proper case If the price of the sale is more then the amount due the creditor, the debtor is not enlitled to the excess uniass tho contrary is provided 3. If the price of the sale is less, the creditor is rot entilled to recover the deficiency even if there is 9 stipulation to thot effect LEGAL PLEDGE: + In legal pledge, there is no definite period for the payment of the principal obligation The pledges must make a demand for the Payment of the amount due him; otherwise he cannot exercise the right of sale at aublic auction (Art, 2122), * The rules governing conventions pledge apply. + The remainder of the price pertains to the debtor Procedure: Sell the thing at a public auction ater one month from the date of demand; otherwis the debtor may require the retum of the thing ‘A contract whereby the debtor secures to ne creditor the fulillment of a principal obtigation, specially subjecting to such security imiovable property of real rights over immovable property in case the principal obligation is not complied with al the tims stipulates, Note: + Asan accessory contract, is consideration Is the same as that of the princ'pal contract from which it receives Ife © A morgaye does not involve a transfer, session or conveyance of prope-ty but only constitutes a lien thereon, + A-mortgage gives the mortgagee no right or Gaim to the possession of the property, ang therefore, a inere mortgagee has no right :0 eject an occupant of the properly warigaged Unless the morlgage should contein some provision to that effect, SPECIAL REQUISITES: 4. Tt can cover only immovable property and lisnable real rights - imposed upon immovables; 2. It must appear in a public instrument, Sin Wedn Coltege of Lay 3, Registration in the registry of property Is necessary to bind'third persons, but not for the validity of the cortract. + Order of foreciosure cannot be refused on the ground thet the mortgaue was not registered provided no innocent third parties are involved. KINDS: : 4. Voluntary — egreed to iby the patties ot consfiteted by the will of the owner of the property on wnich itis croated 2. Legal~ one required by fav. + The persone in. whose favor the law estabishes a Torigage have no other fight then to demend the executlon and the recording of the docuntent in which {ne miorigege is formalized (Ar 2125 par 2) 3. Equitable ~ ene which, "although lacking the ' formalities of a mortgage, shows the Intention of the parties to make the property security for a debt Consttuied immovebles Delivery 13 not necessary to pledge or by ‘common consent to against | thied persons unless a aescription of ihe: thing pledged and data "of pledge | appear in a public instrument Wot Valid against third persons uniess ragictored - oa oe: US ie SU onal bees a ng frongage Sana ne) fe scout 2085(2)) However, © the mortgage lien,San eda College of Fay properties (inpravements) which the mortgagor mey subiejuently acquire instal for use in -connesian. ith tial nroperty already morigages! belonging to the mortgagor ls valid |7e0,le's Bunk anit Trust Co, v, Dahican Lumbor Oo, GR No. L- 17463 Mey 16, 19671, “BLANKET OR DRAGIZT CLAUSE” One which Is apecifcaly phraged to subsume al debts of past or future «rigins. Moripages cf this ‘character enable the pat ies 10 provide continusus eaings , the nature 6° extent of whith may tiot be known or anticipate? at the time, and they avold the expanse and . ineonvenierice af executing a new security on aach naw tranerction {Prudential Bank v. Cor A, Alvar, of al, GR. No. 150197, July 28, 2005; (uy30 v. Cuyoo, GR. No. 168736, April 19, 2096); Provisions of this nature ‘are’‘carefuly scrutinized! ‘end’ strictly conatrued particularly when the martgage contract is one of adhesion. Purpose: : Operates au tonveniaris} and accommodation to borrowers a¢ it makes tvallable arditionsl tunds without the parties having to execute accitionat security documents (Prudential Bank v. Alviar, cupra). Natu ‘A mortgage wih a dragnat clause is an “otter” by the mortgagor to the bark to provide the secunty of the mortgage fur advances of and when they were made. It can be sald that the offer" was net accepted by the bank when a subsequent advance was inade because of new security (Prudontial Bank v, Alvier. supra). SPECIAL RIGHTS: 1.” Mortgagor To ‘alienate tha: mortgaged property but the “mortgage shall remain attached ‘0 the property Note: * A silpulation fofsidding the owner trom alienating the iramovable inortgage shal! be old (Art. 2190) being contrery, to public policy Inasmuch 3 the lrensmission of prapetty, should not be unduly impeded. © Ina sale w/ asst mption of mortgage, the alienation nec, the, consent of he morgage. * 2. Mortyagee = To cléinittom @ 8rd person In possession of the inortgagea prope.ty the payment of the part of the credit securad by the which eaid third person possesses (Art 2129; MEMORY MD IN CIVIL LAN 247, Nole: it is necessary that prior demand for payment must hava heen made on the debtor and tha fatier Talled (e pay (Bank of the Phil v. ¥. Gonccpen & Hifes, GR. No, 27701, July 21, 19289, FORECLOSURE Remedy avallvtle to tha mortgagee by which ho sunjects the scrtgaged — properly to the satisfaction of th obligation to sacure that for which the mortgage was given Yatiy nid Ettoct When the privet obligation is not paid wins. céue, the mortgageo has tha right to foreclose the mortgage and to have tho property selzud anc sold, and te apply. the procteds thereat in thu payment of principal cbligation, 2. The power: ‘9, fereciose resides on the nivrlgages, 4... Incase of deficiency, the debtor is *equired to pay the sama oven ufterforectorule, 4. Tho tule geverning . public notico of foraoloaura inutt be slrctly complied with and slight deviations wil invalidate the sala or render it voldatie. Kinds of Foreconure: 41. Judicial = ordinary action for’ foreciosne Under Rule 88 oi tha Rules of Court 2. Extrajudiciat ~ whon mortgagee 1s: given a special power of attorney fo sel) tho mortgaged penperly by public auction, under ‘Act No. 3135 Judicial and extrajudicial Foreclosure Distinguished Secsione canes Ba oe ane 2a7248 12009 CENTRALIZED BAR OPERATIONS. [aneriay ie [woigagae Te Jeonttactotmengege | neeced in the : contra a ere By Bula | Coveney Fal 58 of the Rules of | S138 {Court | Note: + A foreclosure sale retroacis tc the date of registration of the mortgage and that a person who takes 3 mortgage In good faith and for valuable consideration, the record showing clear tite to the mortgagor, will be protected against equitable ciaims on the tile in favor of third persons, of which he had no actual or constructive notice (St. Dominic Corporation v. IAC, GR Ne. 70523, June 20, 1987) + Mere inadequacy of the orice obtained at the sherif's sale will not be sufficiont to set aside the sale unless “the crice is so inadequate as fo shock the consclence of the court” taking Into consideration the pecuilar circumstances attendant thereto (Sulit v. CA, 3.2. No, 119247, February 17, 1997), + Should there remain a balance due to the mortgagee after applying the proceeds of ine sale, the mortgagee is entitled to recover the deficiency (Rule 68 of the Rules of Cour). This rule DOES NOT appy extrajudicial forectosure real mortgage, + The sctior to recover a deficiency after ferecloutre prescribes after 10 years from the lime the right of action accrues (Ate, 1147 & 1444), Stipulation vf Upset Price or “Tipo” Iti a stipulation 1 a mortgage of real prooerty of ‘rinimum price at which the property shail be sold, to berome operative in the event of a foreclosure sale at public auction. It is null and void lor the Property must be sold to the highest bilder. Paities cannot, by agreement, contravene the law and interfere with the lawful procedure of the courts (BPI v, Yulo, G.R. No. 9358, Seplember 24, 1919). Extrajudicial Foreclosuce of Reel Property (Aci No. 3735) © Exlterjuuicial formelosure must be stipulated in the contract +The law covers only real estate mortgages. It is intended merely to regutate the exirajudicia! sale of the property mostgaged. + The’authorily to sell is not extinguished by the death of the mortgagor (or mortgagee) as it is an essential and inseparable part of & bilateral agreement (Perez v. PNB. GR Ho. L- 21818. July 20, 1966) San Beda College of Zaw + No sale can be legally made outside the province in which the property sold. is situated; sid in case’ the’ place. within sald provines in which the sale is to be made is the subject of stipulation, such sale shail be made in the seid place in the municipal building of the municipatiy in which the properiy or part theteof Is siuated Procedure for Extrajudicial Forvclosure of Both Real Estate Mortgage uader Act No. 3135 and Chattel Mortgage under Act No. 1508 (AM, No. $8-10-U8-0, January 15, 2000, further emended én August 7, 2901) 1. Filing of application before the Executive ‘Judge through the Clerk of Gouri 2. Clerk of Court will examine Whether the reavirement of the: lew have been complied with, that is, whether the notice of sale. has been posted for nat less than 20 deys In at Teast three (9) “public places of the ‘municipality or city wher the property is siiuated, and if the same is worth more than 400.00, that such hotice has been published ‘once a vieek for al least three (8) consecutive weeks in a newspaper of general circulation in the ty of municipality. 3, The certificate of sele must be approved by the Executive Jurige, 4. In extrajudicial foredosure of real mortgages indifferent locations covering one. indebtedness, only one fling. fee sorresponding to suck. debt shal: be collected. 5. The Clerk of Court shall issue certificate of payment indicating the amount of indebtedness, the. fling fees collected, the mortgages sought tu be foreclosed, the ‘description of the teal estates and’ thelr respective locations 6. The ilished Ina Pursuant to jee have no right ‘and publicaiion map ee ncn netSan Meda College of Haws fequirenenta under Adt.:No, 3198. Notices are given to-secwe builders and prevent a ‘acrifce of the pre pert. Clearly, the stetutory requirements of feéting ead publication are rrandated, not for tie moltgrigor’s beni, but for the public cf.thkd perenne. Fatluro to comply with, the suitutofy requitenents us to "publication " of» otice. of “auction. sate constitutes’ a’, juradietional detect ° wich invalidates the sate. (ack of repubiicalion of notice of forecioats tials made subsequently after the original ets fenders auch sale void (PNB ¥. Neporiuine Productions inc. S.P. No. 198478, Doco,rber 27,:2002). +See 8 of Act 3138, does tot reqvire persone! for any particular rotice "6A the mortgagor much Jess on fis uuécessers-in-ntorest e, Whore there fs 12 -contraeiuel stipulation therefor. Henca,: unless required in the mortgage contract, the lack of such notica is hot a ground to set nsiie a forectosuro sale, + ‘Netter dees See 2 requis posting of nln fon the mertgage properly and tho covfcte of posting is: not required, much ‘less coneidered incispensable, ior the validity of a foreclosuro gale... ‘ Redemption Its the transaction ty which the mortgagor reacquires ot buys bacl, tho property which: moy have passed under the mortgage, or d.vests the Property of the lien which the mortgage may have created. Note: +. Asale by the mortgigor to a thid party of the tmortgaged property during the period for redemption transfers. only to anid third person ‘the right to redenm the property and the right to possess, use and enjoy the same curing ‘ald period. 1. Where che sale with assurgtion of mortyage was not registered and made without the ‘consent of the mortgagee, the buyer, thereof, was not validly sibstitited a1 debtor and, hence had no right to redeem (Bomaavt> v. CA, G.R, No, L-4910, Oolaher 24, 1987). Kinds of Redemption: 41. Equity of Redemplica - right of mertyayor to redeem the morfgiiged property after. his default In the perfor ance ef the ceneitlons of the mortgage wilhit the 80-day period trom the date of the. retvice of the order of foreclosure ot evel: thereafter but before the confirmation of tht suid. Applies to [ucictal foreclosure of reti rioitgage wid. chatis! mortgage forectosult, Jaga is MEMORY AID IN CIVIL LAW] 249 Note: Redominitei of the banking tistutions is allowed vathh gna year from confirmation of sale. 2, Right of Revemplion right of mortgagor to redeom the mortgaged property wilhin one year from vie date. of fegisvation of tre Cortiicate of ea, Applies only 10 extrjudicial foreclosure of real mortgage. Nota: The tight of: redemption, as. tong: as within te parlod. “proscribed, . may «'be exercised regardless of-whether or not the mongagee faa: subsequently conveyed tha Property 1 some ether party (Sta. iyna ural Ban's Ine v, GA. GR No. £7872, March 1, 1885, Paros cf Rodomption 2-judicial (Act No. 3135) natural peryonys..one - year «from registration of the certificate uf sala. with Registry of Deeds * . jukisical person = game rule as natusl person 1. fica! parson (mortgagor) and. bank (mortgagee): : To recognize such judgments as Cre-its to the extent of the value of the movable to entitied to protity Would mean that which preference refers. Pay number 1 credit It depositors in insolvent banks, after Afice 2241, and if wo of more credits ia Article learning that the bank is insolvent as 2zAX concur, apply proceeds of sale, pro rato, shown by the fact that it can no (peri passu) te the credits applying Articios 2246 longer pay withdrawals or that it nas and 2747, closed its do r8 or has been enjoined by the Mon.tary Bourd trom doing or immovablas and real rights ~ Sell busitess, wevld rush to the courts to immovaile and real tight and determna if secure judgnsants for the payment of proceods of sale ara sufficient to cover the special their devosits. Less alert depositors preferred crodits in Articia 2242. Exclude all other ‘would be piejudiced. That inequitabie Credits 19 the extent of the value of immovables Situation ‘could not have. been nd real rignts to which preference refers. Pay contemplated! lew (CB v. Morfe, GR avimber 1 in Aficle;224zelhtwo or more ctedits No, £38427: March 12, 1976, March mentioned try Anielé 224@)cogcur ‘apply proceeds Medco pho“ iete PAN GRUB. te gd 12, 1976 credit Transactions by "AA Rodriguez). = Spying Aricles 2240 and 2249. Ml. Common Credits ~ 1 i! is not among these montioned in 2244, 242 and 224i, itis @ common credit. There Is no order of preference ‘among “2mmon, cfeditors; ‘hoy share whaiever Is $31 ln. proportion to thalr credit, royardiess of «st. Note:' Ordinary Préferred and Gotan HP: iit Ui ant it hSuablg’ Credits cover only ‘‘frea property” ot the prefepegely credits Cher 8 debtor, or thoso: nor subjected to Sp-clal such 1 besproperty oF Preferred Cradityici 4° abbficin order io ab: rider Articie Rofectionaty Credit nder Artie Indebtedness , Incurred in the rapair or reconstruction ‘of someting previously made, such repay or recorntruction being made STEP 6: With tye enct¥Rypash sale of arsels covered in Arlicley 2241 and 2242, if aay, sell no en er et tn 5s256 2009 CENTRALIZED BAR OPERATIONS other assets of debtor and satisfy the ordinary preferred credits by applying proceeds of sale in accordance with the order of preference of credits established in Article 2242 (pari, Ariole 2261) Rule on preference apples STEP 7: After applying the proceeds of gale of all properties under Step 6, apply any balance of the procee?s of the sale lo common cred ir accordance with the rule provided in Article 2251, Common credits are those which are not covered or enumerated in Articles 2241, 2242, 2243 and 2244. Rule on concuirrance appiiss, they are paid pro rata regardless of dates (par. 2, Article 2251) San Bena College of Zaw