1.

Antichresis

2. No. A third party mortgagor is not solidarily bound with the principal debtor in fulfilling the principal
obligation. It is only upon the default of the principal that the creditor may have recourse on the
mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount
of the loan. Further, the liability of a third party mortgagor extends only to the property mortgaged,
should there be any deficiency, and the creditor has recourse on the principal debtor.

3.NO, the contention of MICI is not correct. The law provides that a Chattel Mortgage may be
foreclosed either by a public sale or a private sale provided that it has been agreed upon by the parties.
The Chattel Mortgage Law does not prohibit a deficiency judgment after the proceeds from a
foreclosure sale have been applied to the obligation and not adequate to satisfy the debt. Furthermore,
the CM Law does not qualify if the foreclosure sale has to be public or private.

4. NO, SS already filed an action against BB where he prayed “that the court shall order BB to pay the
remaining unpaid balance.”
As held in Floresca v. Lindo (648 SCRA 772), a mortgagor-creditor has a single cause of action
against a mortgagor-debtor, that is to recover the debt. The creditor has the option of either filing a
personal action for the collection of money or instituting a foreclosure proceeding. An election of the
first bars recourse to the second. Otherwise, there would be a multiplicity of suits in which the debtor
would be tossed from one venue to another depending on the location of the mortgaged properties and
the residence of the parties.
By filing an action for collection of money, SS can no longer ask for a writ of replevin over the
vehicle for such writ would in effect be asking for the foreclosure of the property.

5. A mortgagor-creditor has a single cause of action against a mortgagor-debtor, that is to recover the
debt. The creditor has the option of either filing a personal action for the collection of money or
instituting a foreclosure proceeding. An election of the first bars recourse to the second. Otherwise,
there would be a multiplicity of suits in which the debtor would be tossed from one venue to another
depending on the location of the mortgaged properties and the residence of the parties. (Floresca v.
Lindo, 648 SCRA 772).

6. R can file an action to repurchase the property. Act 3135 provides that the one year period of
redemption is reckoned from the registration of the certificate of sale with the registry of deeds. In this
case, the certificate of sale was only registered on April 30, 2005. Hence, the one year redemption
period is reckoned from April 30, 2005. DBP must bear the consequences of its negligence in not
ensuring the registration of the certificate of sale in the Registry of Deeds.

7. Yes. The contention of VBC is correct.

Act 3135, as amended provides that the writ of possession may be issued after the lapse of
redemption period without the need of a bond. The issuance of is a ministerial function, thus the
enforcement of the same by the sheriff is also a ministerial duty.
The right to possess a property merely follows the right of ownership. Thus, after the consolidation of
title in the buyers name for failure of the mortgagee to redeem , the writ of possession becomes a
matter of right and its issuance to a purchaser in a Writ of Extrajudicial foreclosure is a merely
ministerial function.
But there are exceptions to the rule on Ministerial function of the court in issuing the writ of possession,
as stated in the case of Nagtalon v. United Coconut Planters Bank, it held that writ of possession is not a
ministerial function of the court in cases if there are :
1. Gross Inadequacy of the purchase price
2. Third Party claiming the right adverse to debtor / mortgagor
3. Failure to pay the surplus proceeds of the mortgagor

8. As a general rule, Yes, in a chattel mortgage the Mortgagee can sue for a deficiency of the judgment
after the foreclosure. Both the Act 3135 and Chattel mortgage law is silent on the rule that mortgagee
does not have a right to collect deficiency of the principal obligation nor the law prohibits such
collection under the law. The law is only silent about the collection of the deficiency but does not also
prohibit a mortgagee to collect deficiency.
However, if the property was sold in installments, the mortgagee can no longer take any action against
the purchaser to recover the unpaid balance of the price. Any agreement to the contrary is void.

9. Yes, G Co may still recover the deficiency. Although the mortgage law is silent as to the matter of
recovering deficiency after the foreclosure sale of mortgage chattel, there have been a catena of cases
decided by the Supreme Court which allows the chattel mortgage creditor to maintain an action for
deficiency.
In the case of Pameca Wood Treatment vs CA, the SC stated that the effects of foreclosure under the
Chattel Mortgage Law run inconsistent of those of pledge under Article 2115. Whereas in pledge, the
sale of the thing pledged extinguishes the entire principal obligation, such that the pledger may no
longer recover the proceeds of the sale in excess of the amount of the principal obligation, Section 14 of
the Chattel Mortgage Law expressly entitles the mortgagor to the balance of the proceeds, upon the
satisfaction of the principal obligation and costs.
Section 14 of Act No. 1508, as amended, or the Chattel Mortgage Law, states:
The officer making the sale shall, within thirty days thereafter, make in writing a return of his doings and
file the same in the office of the register of deeds where the mortgage is recorded, and the register of
deeds shall record the same. The fees of the officer for selling the property shall be the same as in the
case of sale on execution as provided in Act Numbered One hundred and ninety, 4 and the amendments
thereto, and the fees of the register of deeds for registering the officer's return shall be taxed as a part
of the costs of sale, which the officer shall pay to the register of deeds. The return shall particularly
describe the articles sold, and state the amount received for each article, and shall operate as a
discharge of the lien thereon created by the mortgage. The proceeds of such sale shall be applied to the
payment, first, of the costs and expenses of keeping and sale, and then to the payment of the demand
or obligation secured by such mortgage, and the residue shall be paid to persons holding subsequent
mortgages in their order, and the balance, after paying the mortgages, shall be paid to the mortgagor or
person holding under him on demand.
10. The contention of A is not correct.
As held in the case of Philippine Bank of Commerce vs Macadaeg. “The argument is fallacious because
the mere embodiment of the real estate mortgage and the chattel mortgage in one document does not
fuse both securities into an indivisible whole. Both remain distinct agreements, differing not only in the
subject matter of the contract but in the governing legal provisions. Petitioner bank, therefore had every
right to foreclose the real estate mortgage and waive the chattel mortgage, and maintain instead a
personal action for the recovery of the unpaid balance of its credit.”

11. No, the contract is valid. In accordance with art.2088, the creditor may not appropriate the thing
given by way of pledge, nor can he dispose of the same, and any stipulation to the contrary is void.
Furthermore, the thing pledged is merely a security for the loan, and not payment. What treptor can do
is to buy the thing at the public auction.

12. Yes, jimenez can redeem her property without redeeming others.
From the wordings of the law (art.2089), indivisibility arises only when there is a debt, there is a debtor-
creditor relationship. The indivisibility concept is not applicable to the right of redemption of an
accommodation mortgagor and his assignee with respect to whom third relationship is not present.

13. No, the posting and publication requirements cannot be waived by the parties.
It is well settled that what Act No. 3135 requires are:
1.the posting of notices in the three public places; and
2. The publication of the same in a newspaper of general circulation. Failure to publish the
notice of sale constitutes a jurisdictional defect which invalidates the sale. This cannot be
waived because the notice is not for the mortgagor's public interest, and would infringe the
rights of others. (Pnb v nepomuceno)

14. No, the mortgage on W's share of the land is not extinguished.
Generally, the principal obligation is not affected by the indivisibility of the mortgage unless and until
the debt is secured and has been fully paid.

15. Potter has a better right, for being the owner of the thing pledged by harry. It is essential that the
contract be constituted only by the absolute owner of the thing pledged or at least by the pledgor with
the authority or consent of the owner of the thing pledged. A pledged constituted by an impostor is void
and the pledgee in such case acquires no right whatsoever in the property.

16. no. under article2093 in addition to the requisites prescribe in article 2085. It is necessary , in order
to constitute the contract of pledge, that the thing pledged be placed in the possession of the creditor,
or of the third person by common aggrement. Since the the 4 carabaos was not delivered to the pledge,
the pledge has not been lawfully constituted.

17. The following persons are qualified to bid in the foreclosure sale of the mortgaged vessel
(Section 20, PD 1521):
 (a) Citizens of the Philippines or corporations 60% of the capital of which is owned by Filipino citizens.
(b) A foreign mortgagee or foreign national whose country has diplomatic relations with the Philippines
or whose country grants reciprocal rights to Filipino citizens.
In case the purchaser is a foreign individual or entity, the Philippine Coast Guard shall, upon
presentation of the certificate of sale, cancel the registration of the vessel and issue a certificate to that
effect upon request.

18. Yes, JERICHO’S action will prosper. If the proceeds of the sale are not sufficient to satisfy the claim of
the creditor, the creditor may institute a court action to recover the deficiency, except in the case of
foreclosure of chattel mortgage constituted on personal property which is sold at a price payable in
installments. (Art. 1484)

19. No. Article 2096 of the civil code provides that A pledge shall not take effect against third persons if
a description of the thing pledged and the date of the pledge do not appear in a public instrument.
To affect third persons, mere delivery of possession is insufficient, Art 2096 of the Civil code has
been interpreted in the sense that for the contract to affect 3rd persons, it must appear in a public
instrument in addition to delivery of the thing pledged. ( bachrach motor co. vs lacson Ledesma)
When the contract of pledge is not recorded in a public instrument, it is void as against 3rd
personS; the buyer of the thing pledged is a third person within the meaning of art 2096. The fact that
the person claiming as pledge has taken actual physical possession of the thing sold will not prevent the
pledge from being declared void insofar as the innocent stranger is concerned. (ocejo, perez and co v
int’l bank 37 phil 631)

20. No. Shaina’s contention is not correct. Generally, A house cannot be the subject of a chattel
mortgage because it is a real property. This is so even if the house belongs to a person other than the
owner of the land. However, there may be such a chattel mortgage in the following instances:
- If the parties to the contract agreed and no third persons are prejudiced;
- If what is mortgaged is a house intended to be demolished or removed- for here, what is mortgaged are
the materials thereof are mere personal property.
-
21. Juday, an innocent purchaser for value has a better right over the vehicle.
Under the law, A chattel mortgage is an accessory contract by virtue of which personal property is
recorded in the Chattel Mortgage Register as a security for the performance of an obligation. The
requisites of a chattel mortgage are:

a. Affidavit of good faith and;

b. It must be registered.

Moreover, If what is mortgaged is a car, registration with the LTO is also needed. Absent this, it would
not be binding and invalid as against third persons

22. Answer: Under Article 2107 of the New Civil Code, If there are reasonable grounds to fear the
destruction or impairment of the thing pledged, without the fault of the pledgee, the pledgor may
demand the return of the thing, upon offering another thing in pledge, provided the latter is of the same
kind as the former and not of inferior quality, and without prejudice to the right of the pledgee.

23. Yes. C’s contention is correct. The mortgage is not binding to C since private document does not
amount to registration required by art. 2125 CC that will bind third parties.
No valid mortgage is constituted where the alleged deed of mortgage is a mere private document and,
therefore is not registered.
However, an additional provision is made that if the instrument of mortgage is recorded, the mortgage
is nevertheless binding between the parties.
24. No. Publication is required to give the foreclosure sale a reasonably wide publicity such as those
interested might attend the public sale.
Failure to comply with the statutory requirements of publication of notice of auction sale
constitutes a jurisdictional defect which invalidates the sale or at least render the sale voidable. They
must strictly be complied with. Even slight deviations therefrom are not valid.

25. In Sta. rural bank vs. CA, SC summarized the rules on redemption in the case of an extrajudicial
foreclosure of land acquired under our free patent or homestead statues as follows. If the land is
mortgaged to a rural bank under RA 720, as amended, the mortgagor may redeem the property within 2
years from the date of foreclosure or from the registration of the sheriff’s certificate of sale at such
foreclosure if the property is not covered or is covered, respectively, by a Torrens title. If the mortgagor
fails to exercise such right, he or his heirs may still repurchase the property within 5 years from the
expiration of 2 year redemption period pursuant to act no. 3135. If he fails to do so, he or his heirs may
still repurchase the property within 5 years from the expiration of the redemption period pursuant to
sec.119 of the public land act.

26. the final deed of sale executed by the sheriff in favor of the purchaser at the foreclosure sale shall be
registered with the registry of deeds; whereupon the certificate of title in the name of the mortgagor
shall be cancelled an a new on issued in the name of the purchaser.

27. If the mortgagee is not a bank (act 3135 in relation to sec. 28, rule 39 rules of court)
 purchase price of the property
 1% interest per month on the purchase price
 taxes paid and amount of purchaser’s prior llen, if any, with the same rate of interest
computed from the date of registration of sale up to the time of redemption.

28. a. amount due under the mortgage deed

b. interest
c. cost and expenses

**redemption price in this case is reduced by the income received from the property
>SEC. 47
“… the mortgagor or debtor whose real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of the real estate, to redeem the property
by paying the amount due under the mortgage deed, with interest thereon at rate specified in the
mortgage, and all the costs and expenses incurred by the bank or institution from the sold property less
the income derived therefrom…”

29. Equity of Redemption is the right of the defendant mortgagor to extinguish and retain ownership of
the property by paying the amount fixed in the decision of the court within ninety (90) days to one
hundred twenty (120) days after entry of judgment or even after the sale but prior to its confirmation.
Equity of Redemption is the right to extinguish the mortgage and retain ownership of the
property by paying the debt. The equity of redemption may be exercised even after the foreclosure sale
provided it is made before the sale is confirmed by order of the court.

30. While there is no Right of Redemption available for the mortgagor in judicial foreclosure, the Rule on
judicial foreclosure provides that the mortgagor is given the right to pay his obligations within a period
not less than 90 nor more than 120 days from the finality of judgment by court hearing the judicial
foreclosure. Within this 90 to 120 day period, the mortgagor has the chance to pay the obligation to
prevent his property from being sold. This is called the EQUITY OF REDEMPTION PERIOD.
The equity of redemption period actually extends until the sale is confirmed.
Even after the lapse of the 90 to 120 day period, the mortgagor can still redeem the property, so
long as there has been no confirmation of the sale yet. Therefore, the equity of redemption can be
considered as the right of the mortgagor to redeem the property BEFORE the confirmation of the
sale.

31. The right to redeem must be exercised within the term of one (1) year after the date of the sale.

32. Mere inadequacy of the price obtained at the Sherriff’s sale will not be sufficient to set aside the sale
unless the price is so inadequate so as to shock the conscience of the court taking into consideration the
peculiar circumstances attendant thereto.

33. After the filing of foreclosure proceedings.

34. RTC

35. A preferred mortgage shall have priority over all claims against the vessel, except the following
preferences in the order stated:
1. Judicial costs of the proceedings;
2. Taxes due the Philippine Government;
3. Salaries and wages of the Captain and Crew of the vessel during its last voyage;
4. General average or salvage including contract salvage; bottomry loans; and indemnity due shippers
for the value of goods transported but which were not delivered to the consignee;
5. Costs of repair and equipment of the vessel, and provisioning of food, supplies and fuel during the last
voyage; and
6. Preferred mortgages registered prior in time.
36. Must be appraised at their actual market value at the time of application.

37. Obligations of the antichretic creditor except:

Obligations of Antichretic Creditor
a) The creditor is obliged, unless there is a stipulation to the contrary, to pay the *taxes and charges
upon the estate. If he does not pay the taxes, he is, by law (Article 1170), required to pay indemnity for
damages to the debtor.
b) He is also bound to bear the *expenses necessary for its preservation and repair.
* sums spent for these purposes shall be deducted from the fruits.
c) Another obligation of the creditor is to apply the fruits, after receiving them to the interest, if owing,
and thereafter to the principal (Article 2132) in accordance with the provisions of Article 2133 or 2138.
Hence, the duty of the creditor to render an account of said fruits to the debtor and the
corresponding right of the latter that the said fruits be applied to the debt.

38. If the creditor does not want to pay taxes and incur the expenses necessary for the preservation and
repair of the property, he may compel the debtor to reacquire the enjoyment of the same except when
there is contrary stipulation.

39. CONCURRENCE OF CREDITS Implies the possession by two or more creditors of equal rights or
privileges over the same property or all the property of a debtor

40. A preference of credit is the right held by a creditor to be preferred in the payment of his claim
above others (to be paid first) out of the debtor's assets.

41. Art. 2241. With reference to specific movable property of the debtor, the following claims or liens
shall be preferred:
(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;

(2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials
committed in the performance of their duties, on the movables, money or securities obtained
by them;

(3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the
possession of the debtor, up to the value of the same; and if the movable has been resold by the
debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by
the immobilization of the thing by destination, provided it has not lost its form, substance and
identity; neither is the right lost by the sale of the thing together with other property for a lump
sum, when the price thereof can be determined proportionally;

(4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the
creditor, or those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up
to the value thereof;
 (5) Credits for the making, repair, safekeeping or preservation of personal property, on the
movable thus made, repaired, kept or possessed;

(6) Claims for laborers' wages, on the goods manufactured or the work done;

(7) For expenses of salvage, upon the goods salvaged;

(8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares,
on the share of each in the fruits or harvest;

(9) Credits for transportation, upon the goods carried, for the price of the contract and
incidental expenses, until their delivery and for thirty days thereafter;

(10) Credits for lodging and supplies usually furnished to travelers by hotel keepers, on the
movables belonging to the guest as long as such movables are in the hotel, but not for money
loaned to the guests;

(11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the
fruits harvested;

(12) Credits for rent for one year, upon the personal property of the lessee existing on the
immovable leased and on the fruits of the same, but not on money or instruments of credit;

(13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited,
upon the price of the sale.
In the foregoing cases, if the movables to which the lien or preference attaches have been
wrongfully taken, the creditor may demand them from any possessor, within thirty days from
the unlawful seizure. (1922a)

42. a. if there are three or more credits with respect to the same specific movable property, they shall
be satisfied pro rata, after the payment of duties, taxes and fees due the State or any subdivision
thereof.
b. those credits which enjoy preference with respect to specific movables exclude all others to the
extent of the value of the personal property to which the preference refers.
c. if there are three or more credits with respect to the same specific movable property, they shall be
satisfied solidarily, after the payment of duties, taxes and fees due the State or any subdivision thereof.
d. those credits which enjoy preference with respect to specific movables include all others to the
extent of the value of the personal property to which the preference refers.
43. Art. 2242. With reference to specific immovable property and real rights of the debtor, the following
claims, mortgages and liens shall be preferred, and shall constitute an encumbrance on the immovable
or real right:
(1) Taxes due upon the land or building;
 (2) For the unpaid price of real property sold, upon the immovable sold;

(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects,
engineers and contractors, engaged in the construction, reconstruction or repair of buildings,
canals or other works, upon said buildings, canals or other works;

(4) Claims of furnishers of materials used in the construction, reconstruction, or repair of

buildings, canals or other works, upon said buildings, canals or other works;

(5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged;
(6) Expenses for the preservation or improvement of real property when the law authorizes
reimbursement, upon the immovable preserved or improved;

(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or
executions, upon the property affected, and only as to later credits;

(8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real
property thus divided;

(9) Claims of donors or real property for pecuniary charges or other conditions imposed upon
the donee, upon the immovable donated;

(10) Credits of insurers, upon the property insured, for the insurance premium for two years.
(1923a)
44. Pursuant to recent jurisprudential guidelines introduced by the Supreme Court, laborers have a
preferential right to the proceeds of the land, by virtue of Article 110 of the Labor Code, in relation to
Article 2244 of the Civil Code.
Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees
for unpaid wages either upon all of the properties or upon any particular property owned by their
employer. Claims for unpaid wages do not therefore fall at all within the category of specially preferred
claims established under Article 2241 and 2242 of the Civil Code, except to the extent that such claims
for unpaid wages are already covered Art. 2241 no. 6: " claims for laborers" wages, on the goods
manufactured or the work done; or by Article 2242, no. 3 "claims of laborers and other workers engaged
in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings,
canals and other works. To the extent that claims for unpaid wages fall outside the scope of Art. 2241,
number 6 and 2242, no. 3, they would come within the ambit of the category of ordinary preferred
credits under Art. 2244.
On the other hand, a mortgage directly and immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was
constituted (Art. 2176, Civil Code). It creates a real right which is enforceable against the whole world. It
is a lien on an identified immovable property, which a preference is not. A recorded mortgage credit is a
special preferred credit under Art. 2242 (5) of the Civil Code on classification of credits.
The preference given by Art. 110, when not falling within Art. 2241 (6) and Art. 2242 (3) of the
Civil Code and not attached to any specific property, is an ordinary preferred credit although its impact
is to move it from second priority to first priority in the order of preference established by Art. 2244 of
the Civil Code (DBP vs. NLRC)
Alternative answer: if the proceeds of the land is sufficient to cover all the obligations incurred by X then
the proceeds would apply to his obligation to Y as the mortgagee, to the supplier and the worker
accordingly.
However, if the proceeds of the land is not sufficient to cover all the obligations of X then the
Rule of Preference would apply. In the present case Under the Labor Code (Art. 110, Pres. Decree No.
442, as amended by R.A. No.6715.), "in the event of bankruptcy or liquidation of an employer's business,
his workers shall enjoy first preference as regards unpaid wages and other monetary claims, any
provision of law to the contrary notwithstanding.
Such unpaid wages and other monetary claims shall be paid in full before claims of the
government and other creditors may be paid. The amendment expands the workers' preference to
cover not only unpaid wages but also other monetary claims to which even the claims of the
Government must be deemed subordinate.

45. Pactum Commissorium

In the contract of pledge or mortgage or antichresis, stipulations stating that if the debtor failed to pay
the principal obligation on the time stipulated, the creditor will automatically appropriate the thing
placed as security for the loan, such stipulation is void.
Requisites of PC
a. there should be a pledge, mortgage or antichresis of property by way of security for the payment of
the principal obligation
b. there should be a stipulation for an automatic appropriation by the creditor in the event of
nonpayment of the obligation within the stipulated period.

Effects on security contract

- Nullity of the stipulation does not affect the validity and efficacy of the principal contract.

Permissible stipulation with regards to pactum commissorium:

1. Subsequent modification of original contract by agreement of parties.
2. Subsequent voluntary act of the debtor making cession of property in payment of debt.
3. Promise to assign or sell property in payment of the obligation if, upon its maturity it is not
paid.
4. Authorizing the mortgagee to take possession of the mortgage premises upon the foreclosure
of a mortgage.
5. If after the first and second auctions, the thing is not sold.

Risk of Loss: the debtor-owner bears the risk of loss of the property.

46. Real Mortgage- is a contract whereby the debtor secures to the creditor the fulfillment of a principal
obligation, specially subjecting to such security immovable property or real rights over immovable
property which obligation shall be satisfied with the proceeds of the sale of said property or rights in
case the said obligation is not complied with at the time stipulated.
Chattel Mortgage- it is a contract by virtue of which a personal property is recorded in the Chattel
Mortgage Register as security for the performance of an obligation.
Pledge- is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable
or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal
obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be
returned with all its fruits and accessions.

REAL MORTGAGE CHATTEL MORTGAGE PLEDGE

OBJECT: constituted on real
property or immovable
As a rule mortgagor retains the
property
Registration with the Registry of
Property is necessary to bind
third person.
Effects of mortgage:
Creates real rights, a lien
inseparable from the property
mortgaged, enforceable against
the whole world
Merely creates an encumbrance
Constituted on movables
Delivery of personal property is
not necessary
Registration is necessary for its
validity. Not valid against third
person if not registered.
Effects of registration:
Creates real rights
Adds noting to the mortgage
Note: Registration of
assignment of mortgage is not
required
Constituted on movables
Pledger must deliver the
property to the creditor, or by
common consent, to a third
person
Registration is not necessary for
its validity. Not valid against
third persons unless a
description of the thing pledged
and the date of the pledge
appears in a public instrument.

Effects of invalidity:
Principal obligation remains
valid
Mortgage deed remains as
evidence of a personal
obligation
May guaranty future obligations May NOT guaranty such
If the property is foreclosed, the If the property is sold, the
excess over the amount due debtor is not entitled to the
goes to the debtor. excess UNLESS it is otherwise
agreed or in case of legal
pledges
Creditor is not entitled to Creditor is not entitled to
deficiency from the debtor recover deficiency

47. Art. 2112. The creditor to whom the credit has not been satisfied in due time, may proceed before a
Notary Public to the sale of the thing pledged. This sale shall be made at a public auction, and with
notification to the debtor and the owner of the thing pledged in a proper case, stating the amount for
which the public sale is to be held. If at the first auction the thing is not sold, a second one with the
same formalities shall be held; and if at the second auction there is no sale either, the creditor may
appropriate the thing pledged. In this case he shall be obliged to give an acquittance for his entire claim.
(1872a)
48. Yes, it is valid. The prohibition against pactum commissorium is not applicable to a promise to assign
or sell the property in payment of the obligation if, upon its maturity, it is not paid because the title
thereto remains in the debtor. The promise is merely a personal obligation of the mortgagor and does
not in any way bind the property (Bustamante vs. Rosel).
49. None. Pledge is a contract by virtue of which the debtor delivers to the creditor or to a third person a
movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a
principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall
be returned with all its fruits and accessions. A Torrens title is not a movable nor a document evidencing
incorporeal rights.
None. Since there was no showing that a mortgage was embodied in a public instrument registered in
the Registry of Property, as required by Art. 2125. Teodoro is not the creditor of Cherry.
None. By a contract of antichresis the creditor acquires the right to receive the fruits of an immovable of
his debtor, with the obligation to apply them to the payment of the interest, if owing and thereafter to
the principal. Teodoro is not Cherry’s creditor and there was no mention regarding the entitlement to
receive the fruits.

50. Dragnet clause is a clause in a mortgage deed stating that a mortgage secures all the debts that the
mortgagor may at any time owe to the mortgagee. It operates as a convenience and accommodation to
the borrowers as it makes available additional funds without their having to execute additional security
documents, thereby saving time, travel, loan closing costs, costs of extra legal services, recording fees,
etc. Indeed, it has been settled in a long line of decisions that mortgages given to secure future
advancements are valid and legal contracts (Mojica v. CA).
Such cross-collateral stipulation is valid and binding between the parties (Ajax Marketing and
Development Corp. v. CA).

51. a. is Andrix entitled to demand deficiency from Echo?

No, Andrix cannot demand deficiency from Echo Art 2115 provides that the sale of the thing pledged
shall extinguish the principal obligation, whether or not the proceeds of the sale are equal to the
amount of the principal obligation, interest and expenses in a proper case. If the price of the sale is less,
neither shall the creditor be entitled to recover the deficiency, notwithstanding any stipulation to the
contrary. By electing to sell the articles pledged, the creditor waived any other remedy, and must abide
by the results of the sale. No deficiency is recoverable. [Manila Surety v. Velayo, 21 SCRA 515]
b. if the rings of echo are made of diamonds and were sold for the net amount of Php250,000.00, is
Echo entitled to the excess?

No, Echo is not entitled to the excess Art 2115 provides that the sale of the thing pledged shall
extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of
the principal obligation, interest and expenses in a proper case. If the price of the sale is more than said
amount, the debtor shall not be entitled to the excess, unless it is otherwise agreed.
c. Suppose the rings have been chattel mortgaged to Andrix, is Echo liable to pay the deficiency if the
sale’s proceeds were less than the indebtedness, or is he entitled to the excess, if the proceeds were
more? Explain

Yes, Echo is liable to pay deficiency, a chattel mortgagee can sue for a deficiency judgment following
foreclosure. Andrix can still recover the deficiency as there is no prohibition in the Chattel Mortgage Law

similar to pledge and the excess, if any should be returned to the mortgagor.

54. Under Act No. 3135, if the value of the property subject of the foreclosure is more than P400.00, the
notice of sale must be posted and published. The failure to post a notice is not per se a ground for
invalidating the sale provided that the notice thereof is duly published in a newspaper of general
circulation.
As held in Development Bank of the Philippines v. Aguirre, the failure to post a notice is not a
ground for invalidating the sale as long as the notice is duly published in a newspaper of general
circulation. Thus, publication of the notice of sale is sufficient compliance with the statutory
requirement on notice-posting.

55. In a case, a mortgage house built on a rented land, was held to be a personal property, not only
because the deed of mortgage considered it as such, but also because it did not form part of the land
(Evangelista v. Abad [CA];36 O.G. 2913), for it is now well settled that an object placed on land by one
who has only a temporary right to the same, such as a lessee or usufructuary, does not become
immobilized by attachment (Valdez v. Central Altagracia, 222 U.S. 58, cited in Davao Sawmill Co., Inc. v.
Castillo, et al., 61 Phil. 709). Hence, if a house belonging to a person stands on a rented land belonging
to another person, it may be mortgaged as a personal property is so stipulated in the document of
mortgage. (Evangelista v. Abad, supra.) It should be noted, however, that the principle is predicated on
statements by the owner declaring his house to be a chattel, a conduct that may conceivably estop him
from subsequently claiming otherwise (Ladera, et al.. v. C. N. Hodges, et al., [CA]; 48 O.G. 5374). The
doctrine, therefore, gathered from these cases is that although in some instances, a house of mixed
materials has been considered as a chattel between them, has been recognized, it has been a constant
criterion nevertheless that, with respect to third persons, who are not parties to the contract, and
specially in execution proceedings, the house is considered as an immovable property (Art. 1431, New
Civil Code).