1.

4 Pts

BPI properly resorted to foreclosure proceedings under Act 3135 for the indebtedness on the
X-MEN Account provided that there is a special power in the mortgage contract authorizing
for extrajudicial foreclosure. If there is no special power in the mortgage contract, then BPI
must have resorted to judicial foreclosure under Rule 68 of the Rules of Court.

As regards the umbrella account, when BPI filed a complaint for the recovery of sum of
money, it can no longer avail the right of foreclosure.

Therefore, it was improper for BPI to add the solidary undertaking of X-MEN under the
Umbrella account when it submitted a statement of account to the provincial sheriff.

2. 5 pts

No, the antichretic creditor cannot acquire the subject property through acquisitive
prescription. The Civil Code provides that one can acquire prescription when he is in adverse
possession or possession in the concept of an owner of the property.

An antichretic creditor only possesses the immovable in order for him to enjoy the fruits and
apply it as payment of interest, if owing, and thereafter the principal of the credit. He is not
in adverse possession of the property. Thus, he cannot acquire such property through
acquisitive prescription.

4. 5 pts

Refectionary credit is the credit acquired for the construction of a specific property. It is the
credit acquired for the making or repair of the property.

5. 4 pts

Phil Veterans Bank has a better right to the property.

At the time the mortgage was constituted, he TCT was already in the name of Ireneo, the
mortgagor, PVB can be considered as a mortgagee in good faith by relying on what appears
on the certificate of title.

The foreclosure initiated by PVB was proper upon default of the debtor, Ireneo. PVB as the
highest bidder was issued a certificate of sale and a title in its name. the annotation of
notices of lis pendens in PVS’s title will not invalidate the mortgage nor the foreclosure sale.

6. 3 pts

There is a valid mortgage in the case at bar. The Special Power of Attorney executed by Mr.
Lindo authorizing Ms. Lindo to mortgage the property validates the Deed of Real Estate
Mortgage executed between Ms. Lindo and Flores.

As Mr. Lindo defaulted in the payment of her loan, it was proper for Flores to file an action
for foreclosure at the real estate mortgage. The action should have prospered because there
was a valid mortgage.

Availing the foreclosure, Flores can no longer filed a case for collection of money since these
2 remedies are not cumulative but mutually exclusive.

7. 5 pts

Yes, the private sale is valid.

Jurisprudence provides that there is nothing contrary to law, public morals or public policy in
resorting to a private sale of the property covered by a chattel mortgage.

What is prohibited by law is the automatic transfer of ownership of the property mortgaged
to the creditor upon default of the debtor.

In a private sale, the property was still alienated and the proceeds were applied for the
satisfaction of the judgement or the mortgage debt.

8. 8 pts

Rem Chattel mortgage Pledge

A mortgage contract
constituted on real property
for the purpose of securing
a principal obligation
It cannot include future
properties
It can secure future debts
through the dragnet clause
Excess of the proceeds goes
to the debtor
Act 3135 as amended by Act
4148
Creditor can recover the
deficiency
The personal property is
registered in the Registry for
the purpose of securing the
fulfilment of a principal
obligation
It cannot include future
properties
It can only secure existing
debts obligations
Excess of the proceeds goes
to the debtor
Chattel mortgage law
Creditor can recover the
deficiency except for
personal property payable
on installment
A personal property is
delivered to the creditor as
a security for the fulfilment
of a principal obligation
It cannot include future
properties
Debtor has no right to
demand the excess. It is
retained by the creditor
Art. 2112 of the New Civil
Code
Creditor cannot recover the
deficiency

2019 question

CHATTEL
PLEDGE MORTGAGE
MORTGAGE
DEFINITION In a contract of A real estate mortgage By a chattel
pledge, a debtor or is a contract whereby mortgage, personal
third person delivers immovable property or property is recorded in
movable property or real rights over the Chattel Mortgage
an incorporeal right immovable property Register as a security
to a creditor or third are given in order to for the performance of
person, in order to secure the fulfillment an obligation. If the
secure the fulfillment of a principal movable, instead of
of a principal obligation. If the being recorded, is
obligation. debtor defaults, the delivered to the
property given must creditor or a third
be sold at a person, the contract is
foreclosure sale, and a pledge and not a
the proceeds thereof chattel mortgage.
applied to the
principal obligation.
SUBJECT Movable things which Objects of contact of Personal or movable
MATTER are within the mortgage are property
commerce of men immovable and
may be pledged alienable real rights
provided they are imposed upon
susceptible of immovables
appropriation
REQUIRED A pledge shall not Public Document Public Document
FORMS 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.
FORECLOSRE Judicial Foreclosure Public Sale
Extrajudicial -if the mortgagor
foreclosure defaults in the
payment of the
secured debt or
otherwise fails to
comply with the
conditions of the
mortgage the creditor
has no right to
appropriate the
property to himself
because he is
permitted only to
recover his credit from
the proceeds of the
sale of the property at
public auction through
a public officer in the
manner prescribed in
Sec. 14 of Act. 1508
Private Sale
-there is nothing
illegal, immoral, or
against public order in
an agreement for the
private sale of the
personal properties
covered by the chattel
mortgage
REDEMPTION There is no  Equity of redemption Equity of Redemption
countervailing statute Equity of redemption (30 days)
enacted since then or the right of the The redemption is
that would accord to mortgagor in case of made by paying or
the right of judicial foreclosure to delivering to the
redemption over redeem the mortgagee the
personal property. mortgaged property amount due on such
As to execution of after his default in the mortgage and the
sales of real property, performance of the costs and expenses
 the right of conditions of the incurred by such
redemption under mortgage but before breach of condition
Rule 39 of the ROC the confirmation of the before the sale thereof
applies only to sale of the mortgaged
execution sales over property
real property and not  Right of redemption
personal property. Right of redemption or
Nor does Act No. the right of the
3135 applies under mortgagor in case of
pledge. extrajudicial
foreclosure to redeem
the mortgaged
property within a
certain period from
and after it was sold
for the satisfaction of
the mortgage debt
DEFICIENCY The creditor is not IT DEPENDS. CHAR. The creditor is entitled
entitled to recover In judicial to recover the
the deficiency in all foreclosure, the deficiency from the
cases. Rules of Court debtor
specifically gives the
mortgagee the right to
claim for deficiency in
case deficiency exists
(Sec. 6, Rule 68.)
while Act No. 3135
governing
extrajudicial
foreclosures of
mortgage does not
give a mortgagee the
right to recover
deficiency after the
public auction sale,
neither does it
expressly or impliedly
prohibit such recovery.

9.

Book answer:

Antichresis
Property is delivered to the creditor
Creditor acquires only the right to receive
fruits of the property; hence it does not
produce a real right
The creditor, unless there is a stipulation to
the contrary, is obliged to pay the taxes and
charges upon the estate
It is expressly stipulated that the creditor
Mortgage
Debtor usually retains possession of the
property
Creditor does not have any right to receive
the fruits, but mortgage creates a real right
over the property which is enforceable
against the whole world
The creditor has no such obligation
There is no such obligation on the part of
given possession of the property shall apply the mortgagee
the fruits thereof to the payment of
interest, if owing, and thereafter to the
principal of the credit
Both is similar, in that the subject matter is a real property
Like pledge and mortgage, antichresis gives
a real right if it is registered in the registry
of property

1. What is pactum commissorium?

A stipulation whereby the thing pledged or mortgaged or under antichresis

shall automatically become the property of the creditor in the event of
nonpayment of the debt within the term fixed

2. What is pledge?

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.

3. What is chattel mortgage

A contract by virtue of which personal property is recorded in the Chattel
Mortgage Register as a security for the performance of an obligation. It is not
a real contract.

4. What is real estate mortage

Mortgage (otherwise known as “real estate mortgage” or “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.

5. What is 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.

6. What is the dragnet clause?

A “dragnet clause” 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, et cetera.

7. What is affidavit of good faith

It is an oath wherein the parties severally swear that the mortgage is made for
the purpose of securing the obligation specified in the condition and for no
 other purpose and that the same is valid and just and one not entered into the
purpose of fraud.

8. What is equitable mortgage

one which, although lacks the proper formalities, reveals the intention of the
parties and contains nothing impossible or contrary to law.

9. What is the doctrine of mortgagee in good faith?

The mortgagee has a right to rely in god faith on what appears on the
certificate of title of the mortgagor and in the absence of anything to excite
suspicion, he is under no obligation to look beyond the certificate and
investigate the title of the mortgagor appearing on the face of the certificate.

10. Real estate mortgage covers what?

It extends to all its accessions, improvements, growing fruits and rents or
income as well as to the proceeds of insurance should the property be
destroyed, or the expropriation value of the property should it be
expropriated.

11. Does inadequacy of a bid price nullify foreclosure sale?

General rule: NO.

exception. Where there is a right to redeem, inadequacy of price is not material
because the judgment debtor may reacquire the property or else sell his right to
redeem and thus recover any loss he claims to have suffered by reason of the price
obtained at the auction sale.
Mere inadequacy of the price obtained at the sheriff’s sale will not be sufficient to
annul or set aside the foreclosure sale
UNLESS “the price is so inadequate as to shock the conscience of the court” taking
into consideration the peculiar circumstances attendant thereto.

12. What are the remedies available to the creditor in case of deficiency judgement?

The creditor may institute two alternative remedies:

a. either a personal action for the collection of debt
b. or a real action to foreclose the mortgage,
c. but not both.

13. Yes, it is valid. It is not a case of pactum commisorium because the creditor is just
given preference over others through a foreclosure proceeding in which it is not
prohibited by law

14. It depends. If the winning bid at the foreclosure is sufficient enough to distinguish the
obligation of the debtor, the foreclosure may extinguish the debt. However, if it is not
sufficient enough, the creditor may oblige the debtor to pay the remaining amount.

15. What is an upset price?

A stipulation in a mortgage of real property fixing a “tipo” or upset price, i.e.,
the minimum price at which the property shall be sold, to become operative in
the event of a foreclosure sale at public auction, is null and void for the
property must be sold to the highest bidder. Parties cannot, by agreement,
contravene the law and interfere with the lawful procedure of the courts.
16. (rem) In case of default, what are the remedies of the creditors

One declared in default has the following remedies:

a) The defendant in default may, at any time after discovery thereof and before
judgment, file a motion under oath to set aside the order of default on the
ground that his failure to answer was due to fraud, accident, mistake or
excusable negligence, and that he has a meritorious defense (Sec. 3, Rule 18
[now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant discovered the
default, but before the same has become final and executory, he may file a
motion for new trial under Section 1(a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and
executory, he may file a petition for relief under Section 2 [now Section 1] of
Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the
evidence or to the law, even if no petition to set aside the order of default has
been presented by him (Sec. 2, Rule 41).
Moreover, a petition for certiorari to declare the nullity of a judgment by default is
also available if the trial court improperly declared a party in default, or even if
the trial court properly declared a party in default, if grave abuse of discretion
attended such declaration

18. May a real estate mortgage include future properties?

 No. Because the mortgagor cannot legally mortgage any property he did not own
yet.
 XPN: The parties may agree that the mortgage will extend to future properties of
the mortgagor but such will only constitute an agreement to mortgage the future
property
o However, a stipulation subjecting to the mortgage lien, properties
(improvements) which the mortgagor may subsequently acquire, install, or
use in connection with real property already mortgaged belonging to the
mortgagor is valid

19. May a chattel mortgage include future properties?

FUTURE PROPERTY CANNOT BE OBJECT OF MORTGAGE

a. Future property cannot be the object of a contract of mortgage
A stipulation however subjecting the mortgage lien, properties which the
mortgagor may subsequently acquire, install, or use in connection with real
property already mortgaged belonging to the mortgagor is valid