RFBT 3- LAW ON CREDIT TRANSACTIONS

Pre-test

1. The following requisites are essential to the contracts of pledge. seal estate mortgage and
chattel mortgage, except
a. That they be constituted to secure the fulfillment of a principal obligation such as
contract of loan.
b. That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged.
c. That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally-authorized for the purpose.
d. That when the principal obligation becomes due, the things in which the pledge or
mortgage consists may be alienated for the payment of the creditor.
e. That the thing pledged or mortgaged be places in the possession of the creditor, or of a
third person by common agreement.
2. The following are kinds of principal obligations that may be secured by a contracts of pledge,
of real estate mortgage or of chattel mortgage, except
a. Pure obligations
b. Conditional obligation whether suspensive condition or resolutory condition
c. Obligations with a period whether suspensive period (ex die) or resolutory period (in
diem)
d. Natural obligations
e. Rescissible obligations
f. Voidable obligations
g. Unenforceable obligations
h. Null and void obligations
3. When in the pledgor or mortgagor required to be the owner of the thing pledged or mortgaged
for the validity of contracts of pledge, of real estate mortgage or of chattel mortgage?
a. At the time the principal obligations is constituted.
b. At the time the contract of pledge or mortgage is constituted.
c. At the time of the failure to pay the principal obligation.
d. At the time the thing to be pledged or mortgaged is to be delivered.
4. D borrowed P1,000,000 from C. G a third person, mortgaged his land to secure the fulfillment of
D’s loan. IS the contract of mortgage valid?
a. No because D must be the owner of the mortgaged land.
b. Yes provided G will deliver the land to C.
c. Yes because third persons who are not parties to the principal obligation may secure
the latter by pledging or mortgaging their own property.
d. No because G is no privy to the contract of loan.
5. D borrowed P20,000 from C. To secure the fulfillment of loan, D mortgaged a land owned by
ailing father. Which of the following statements is correct?
a. The contract of mortgage is valid because future property may be pledged or
mortgaged.
b. The contract of loan is null and void because the contract of mortgage is null and void.
c. The contract of mortgage will become valid upon the death of D’s father.
d. The contract of mortgage is null and void because the mortgagor must be the owner of
the property mortgaged at the time it is constituted but the contract of loan remains to
be valid.
6. ABC Inc. borrowed P2,000,000 from BPI. ABC Inc. is under receivership. To secure the fulfillment
of the loan, ABC mortgage its administrative building. Which of the following statements is
correct?
a. The contract of mortgage is null and void because the mortgagor has no free disposal
of the thing.
b. The contract of mortgage is valid because the mortgagor is the absolute owner of the
property mortgaged at the time the mortgaged is constituted.
c. The contract of mortgage is null and void because only natural person may enter in a
contract of mortgage.

Page 1 of 18
 d. The contract of mortgage is voidable.
7. It is a stipulation whereby the thing pledged or mortgaged shall automatically become the
property of the creditor in the event of non-payment of the debt within the term fixed.
a. Pactum credatium
b. Pactum commissonum
c. Pactum debitarium
d. Pactum crematorium
8. D borrowed P10,000 from C. To secure the fulfillment of the loan, D pledged his laptop. The
contract of pledge provides that the creditor-pledge may appropriate the laptop upon failure
of the debtor-pledgor to pay the loan. On the date of maturity of the loan, D failed to pay the
loan. Which of the following statements is correct?
a. C becomes the owner of the laptop.
b. The laptop cannot be alienated for the payment of the loan.
c. C does not become the automatic owner of the laptop upon D’s failure to pay the loan
because that provision is considered pactum commissorium which is contrary to law
and public policy.
d. The contract of pledge is null and void because of pactum commissorium provision.
9. D borrowed P10,000 from C. To secure the fulfillment of the loan, D pledged his laptop. On the
date of maturity of the loan, D failed to pay the loan. As a result, D and C agreed that the
pledged laptop shall be owned by C in full satisfaction of the secured contract of loan. Which
of the following statements is correct?
a. C becomes the owner of the laptop by reason of dacion en pago which governed by
Law on Sales.
b. The laptop cannot be alienated for the payment of the loan.
c. C does not become the automatic owner of the laptop upon D’s failure to pay the loan
because their subsequent agreement is considered pactum commissorium which is
contrary to law and public policy.
d. Their subsequent agreement for the payment of the loan shall be governed by law on
obligation because that is a novation.
10. The following are the instances where the thing pledged or mortgaged may be sold or
alienated to pay the principal obligation, except
a. If the pledgor or mortgagor fails to fulfill certain conditions and such violation would
make the debt due and demandable.
b. If the debtor has lost the right to make use of the period or where there is an acceleration
clause in the payment of installment.
c. Upon default to pay the obligation at maturity.
d. Before maturity of the principal obligation.
11. What is the nature of a contract of pledge, of chattel mortgage, of real estate mortgage or of
antichresis?
a. It is divisible if the principal contract is joint.
b. It is indivisible if the principal contract solidary.
c. It is divisible whether the principal contract is joint or solidary.
d. It is indivisible whether the principal contract is joint or solidary.
12. D borrowed P10,000 from C and pledged his ring an watch with P4,000 and P6,000 value
respectively. After several days, D pays P4,000 to C. Which of the following statements is
correct?
a. The contract of pledge is extinguished.
b. The contract of loan is extinguished.
c. D cannot demand the release of his ring because a contract pledge is indivisible.
d. D may compel C to return the ring because P4,000 of the loan is already paid.
13. D borrowed from C P100,000 secured by a mortgage on D;s two lots (lot 1 and lot 2). D dies
leaving E and F as heirs with E inheriting lot 1 and F lot 2. F pays P50,000 of the loan. Which of the
following statements is correct?
a. F may ask for the extinguishment of the mortgage on lot 2.
b. The contract of mortgage is extinguished.
c. The contract of loan is extinguished.
d. F cannot ask for the extinguishment if the mortgage on lot 2.

Page 2 of 18
14. Using the same data in preceding number, suppose it is C who dies leaving X and Y as heirs. If
D pays X P50,000, which of the following statements is correct?
a. The contract of pledge on the watch is extinguished.
b. The contract of loan is fully extinguished.
c. D cannot demand the release of his ring because a contract of pledge is indivisible.
d. D may compel C to return the ring because contract of pledge on the ring is
extinguished.
15. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value
respectively. They agreed that the ring will secure P4,000 of the loan and the watch will secure
the balance of the loan. After several days, D pays P4,000 to C. Which of the following
statements is correct?
a. The contract of pledge on the watch is extinguished.
b. The contract of loan is full extinguished.
c. D cannot demand the release of his ring because a contract of pledge is indivisible.
d. D may compel C to return the ring because contract of pledge on the ring is
extinguished.
16. A and B jointly borrowed P10,000 from C. In order to secure their respective obligations, A
pledged his cellphone while B pledged his laptop. A paid P5,000 of the loan. Which of the
following statements is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a contract of pledge is
indivisible.
d. The contract of pledge on the laptop is extinguished.
17. A and B jointly borrowed P10,000 from C. In order to secure the obligation, A pledged his
cellphone while B pledged his laptop. At the maturity date of the loan, A paid P5,000 of the
loan. Which of the following statements is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a contract of pledge is
indivisible.
d. The contract of pledge on the laptop is extinguished.
18. It is a contract by virtues of which the debtor delivers to the creditor or to a third person a
movable, or instrument 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
delivers shall be returned with all its fruits and accessions.
a. Contract of Pledge
b. Contract of Chattel mortgage
c. Contract of Real estate mortgage
d. Contract of Antichresis
19. In case the cause or consideration of the contract of pledge is not stipulated, what is the cause
or consideration of a contract of pledge?
a. It has no cause or consideration.
b. The cause or consideration of the principal obligation or contract of loan.
c. The cause or consideration is the liberality of the pledgor.
d. The cause is the service remenerated.
20. The following are the characteristics of a contract of pledge, except
a. Consesual – It is perfected by mere consent.
b. Accessory – It has no independent existence of its own because there must be contract
of loan.
c. Unilaterial – It creates an obligation on the part of the creditor to return the thing upon
the fulfillment of the principal obligation.
d. Subsidiary – The obligation incurred does not arise until the fulfillment of the principal
obligation which is secured.
21. The following are the essential requisites of conventional pledge, except

Page 3 of 18
 a. That it be constituted to secure the fulfillment of a principal obligation or contract of
loan.
b. That the pledgor be the absolute owner of thing pledged.
c. That person constituting the pledge has the free disposal of his property,and in the
absence theoref,that he be legally authorized for the purpose.
d. That the thing pledged be placed in the possession of the creditor,or a third person by
common agreement or there must be delivery of the thing pleged.
e. That the contract of pledge be constituted in public document.
22. What is the nature of a contract to constitute a pledge?
a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
23. What is the legal effect of a promise or contract to constitute a pledge?
a. It is perfected by delivery of the thing pledge.
b. It is perfected through the notarization of the promise.
c. It is perfected by mere consent and gives gives rise only to a personal action between
the contracting parties.
d. It gives rise to a real action over the thing pledged.
24. The following statements pertaining to a promise to constitute a pledge or mortgage are
correct, except
a. It gives rise only to personal action between the contracting parties.
b. The contract perfected is a real contract.
c. It creates no real right in the property but only a right to compel the fulfillment of the
promise but there is no contract of pledge or contract of mortgage yet.
d. The promissor will be criminally liable if he mortgages or pledges as unencumbered
things which he knew were subject to some burden.
25. What is the nature of a contract of pledge?
a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
26. The following may become the object of a contract of pledge, except
a. All movable
b. Personal property susceptible of possession.
c. Incorporeal rights which are evidenced by negotiable instruments, bill of lading, shares
of stocks, bonds, warehouse receipts and similar documents.
d. Real or immovable properties and rights thereon.
27. What is the form of contract of pledge to bind the contracting parties?
a. It must be in a private instrument.
b. It must be in a public instrument.
c. It must be registered in the registry of deeds.
d. It may be in any form because it is a real contract.
28. What is the form of contract of pledge to bind or to affect third person?
a. It must be registered in the chattel mortgage registry.
b. It must be registered in the registry of deeds.
c. It must be in public instrument showing a description of the thing pledged and the date
or the pledge.
d. It must be recorded in the Intellectual Property Office.
29. The contract of pledge shall cover the following, except
a. The thing pledged.
b. The fruits, income, dividends or interests earned or produced by the thing pledged,
unless there is stipulation excluding them.
c. The offspring, when the thing pledged is an animal, unless there is a stipulation excluding
them.
d. The future inheritance of the pledgor.

Page 4 of 18
30. The following are the rights of the debtor-pledgor, except
a. To alienate, with the consent of the pledge, the thing pledged.
b. To continue to be the owner of the thing pledged unless it is expropriated.
c. To become the owner of the offspring of the animal pledged if there is no stipulation to
the contrary but such offspring shall be subject to the pledge.
d. To ask for the return of the thing pledged after he has paid the debt and its interest, with
expenses in a proper case.
e. To ask that the thing pledged be judicially or extra-judicially deposited if its used without
authority or for a purposes other than for its pereservation.
f. To require that the thing be deposited with a third person if it is in danger of being lost or
impaired through the negligence or willful act of the pledge.
g. To demand the return of the thing pledged, upon offering another thing in pledge,
provided the latter is of the same kind and quality, if there are reasonable grounds to
fear the destruction or impairment of the thing pledged without the fault of the pledgee.
This right is without prejudice to the right of the pledge to have the thing sold at a public
sale.
h. To demand the return of the thing pledged despite defaulting on the payment of the
secured principal obligation.
31. In case the thing pledged is alienated by the debtor-pledgor to third person, what is the effect
of the consent of the pledge to the alienation made by the pledgor of the thing pledged to
third person?
a. The thing pledged remains to be owned by the debtor-pledgor
b. The ownership of the thing pledged is transmitted to the buyer
c. The creditor-pledgee loss possession of the thing pledged
d. The contract of pledge is already extinguished
32. What is the remedy of the pledgor-debtor if the pledge-creditor use the thing pledged, without
the authority of the owner or should misuse the thing in any other way?
a. To ask that it be judicially or extra-judicially deposited
b. To ask for the return of the thing pledged
c. To ask for the extinguishment of the contract of pledge
d. To ask for the extinguishment of the contract of loan.
33. What is the remedy of the pledgor-owner if the thing pledged is in danger of being lost or
impaired through the negligent or willful act of the pledge?
a. To require that it be deposited with a third person
b. To ask for the return of the thing pledged
c. To ask for the extinguishment of the contract of pledge
d. To ask for the extinguishment of the contract of loan.
34. What is the remedy of the pledgor-owner if there are reasonable grounds to fear the destruction
or impairment of the thing pledged without the fault of the pledge?
a. To ask for the return of the thing upon offering another thing inn pledge, provided the
latter ois of the same kind as the former and not of inferior quality but subject to the right
of the pledge to sell the said pledged item in public auction.
b. to require that it be deposited with a third person
c. to ask for the extinguishment of the contract pledge
d. to ask for the extinguishment of the contract of loan
35. if there are reasonable grounds to fear the destruction or impairment of the thing pledged
without the fault of the pledge which is correct?
a. The pledgor-owner may ask for the return of the thing, upon offering another thing in
pledged, provided the latter is of the same kind as the former and not of inferior quality
even it is already sold in public auction by the pledge-creditor.
b. The pldgee-creditor may cause the sale of the thing pledged at a public sale and the
proceeds of the auction shall be a security for the principal obligation in the same
manner as the thing originally pledged. However, the pledge is bound to advise the
pledgor, without delay, of any danger to the thing pledged.
c. The right of the pledgor-owner is superior to the right of the pledge-creditor.

Page 5 of 18
 d. The contract of pledge is extinguished by the sale of the thing pledged in the public
auction.
36. The following are the obligation of the debtor-pledgor, except
a. To pay the debt and its interest, with expenses, in a property case, when they are due.
b. To pay damages that the pledge may suffer by reason of the flaws of the thing pledged,
if he was aware of such flaws but he did not advise the pledge of the same
c. To pay for the expenses which are necessary for the preservation of the thing pledged
d. To warrant the thing pledged for its quality and merchantability
37. The following are the rights of the creditor-pledgee, except
a. To retain in his possession the thing pledged until the debt is paid
b. To demand reimbursement of the expenses made for the preservation of the thing
pledged
c. To bring actions which pertain to the owner of the thing pledged in order to recover it
from, or defend it against third person.
d. To use the thing pledged if he is authorized to do so, or when its use is necessary of the
preservation of the thing
e. To cause the sale of the thing pledged at a public sale, if there is a danger destruction,
impairment or diminution of value of thing pledged without his fault. The pledge is bound
to advise the pledgor, without delay, of any danger to the thing pledged.
f. To collect and receive the amount due if the thing pledged is a credit which becomes
due before it is redeemed, and to apply the same to the payment of his claim.
g. If the pledge earns or produces fruits, income, dividends, or interests, the creditor shall
compensate what he receives with those which are owing him; but if none are owing
him, or insofar as the amount may exceed that which is due, he shall apply it to the
principal. Unless there is a stipulation to the contrary, the pledge shall extend to the
interests and earnings of the right pledged.
h. To sell the thing pledged upon defauh of the debtor
i. To appropriate the thing pledged in case the thing pledged is not sold in first and second
public auctions.
j. To become the automatic owner the thing pledged upon first default of debtor to pay
the principal obligation at maturity date.
38. The following are the obligation of creditor-pledgee,except
a. To take care of the thing pledged with the diligence of a good father of a family
b. To be liable for the loss or deterioration of the thing pledged unless it is due to a fortuitous
event
c. To be responsible for the acts of his agents or employees with respect to the thing
pledged.
d. Not to use the thing pledged except when he is authorized by the owner or when the
use of the thing is necessary for its preservation
e. To deliver the debtor the surplus after paying his claim from what he has collected on a
credit that was pledged and which has become due before it is redeemed
f. To deposit the thing pledged with a third person even not authorized by the court
39. The following are the rights of a third person who pledges his own movable property to secure
debt of another, except
a. To be indemnified by the debtor if he pays the creditor
b. To be subrogated to all the rights of the creditor against the debtor if he pays creditor
c. To be released from liability in the cases provided by law
d. To become principally liable
40. Grace obtained a loan from Jojo in the amount of P1M with Mar serving as guarantor. Rody
pledged his cell phone to secure the debt of Grace. If Rody pays the P1M loan of Grace, which
is correct?
a. Thre will be no legal subrogation if Grace does not consent to the payment of Rody
b. Rody cannot collect the P1M from Grace if the latter does not consent to the payment
of Rody
c. Rody can collect the P1M from Mar if Grace will not be able to pay Rody
d. Mar is not liable to Rody

Page 6 of 18
41. A third person who pledges his own movable property to secure the debt of another shall be
released from liability in the following cases and may ask for the return of the thing pledge from
the pledge, except
a. If the creditor voluntarily accepts immovable property in payment of the debt even if
the creditor thereafter loses the same by eviction
b. If an extension of time is granted to the debtor by the creditor without pledgor’s consent
c. If through some act of creditor, the pledgor cannot be subrogated to the rights,
mortgages and preferences of the creditor
d. If the thing pledged is deteriorated on the fault of the pledge
e. If the debtor defaults in the payment of principal obligation on the maturity date
42. If two or more things are pledged, who has the right to choose which thing will be sold in the
absence of stipulation?
a. Pledgor
b. Pledge
c. Debtor
d. Government
43. Pledge may be extinguished directly or indirectly. The following are the modes of extinguishing
the contract of pledge directly, except
a. When the principal obligation secured by the pledged is extinguished
b. Return by the pledge of the thing pledged to the pledgor or owner
c. Renunciation or abandonment in writing by the pledgee of the pledge
d. Sale of the thing pledged regardless of the net proceeds
e. Appropriation of the thing pledged by the pledgee if the thing pledged is not sold in the
first and second auctions.
44. Which of the following direct modes of extinguishing contract of pledge impliedly extinguish the
principal obligation or contract of loan?
I. Return by the pledgee of the thing pledged to the pledgor or owner
II. Renunciation or abandonment in writing by the pledgee of the pledge
III. Sale of the thing pledged in public auction in case of default by debtor regardless of
the amount of the net proceeds of sale
IV. Appropriation of the thing pledged in case the thing pledged is not sold in the first and
second public auctions
a. I and II
b. III and IV
c. I and III
d. II and IV
45. Which of the following direct modes of extinguishing contract of pledge do not impliedly
extinguish the principal obligation or contract of loan?
V. Return by the pledgee of the thing pledged to the pledgor or owner
VI. Renunciation or abandonment in writing by the pledgee of the pledge
VII. Sale of the thing pledged in public auction in case of default by debtor regardless of
the amount of the net proceeds of sale
VIII. Appropriation of the thing pledged in case the thing pledged is not sold in the first and
second public auctions
a. I and II
b. III and IV
c. I and III
d. II and IV

46. Which of the following stipulations in a contract of pledge is null and void?
I. A stipulation which provide that the contact of pledge is nit extinguished by the return
of the thing pledged
II. A stipulation allowing the appropriation by the pledgee of the thing pledged in case
the same is not sold in the first and second auctions
III. A stipulation for the recovery of deficiency in case the proceeds from the sale of the
thing pledged is less than the amount of the obligation.
a. I and III

Page 7 of 18
 b. II and III
c. I and II
d. I, II, and III
47. If the thing is found in the possession of the pledgor or owner of the thing in the possession of a
third person who has received it from the pledgor or owner , which of the following is incorrect?
a. There is prima facie presumption that the contract of pledge is extinguished
b. There is prima facie presumption that pledgee returned the thing pledged
c. There is prima facie presumption that the contract of loan is extinguished
48. Which of the following statements is incorrect in case the pledge renounces or abandons in
writing the contract of pledge?
a. The contract of pledge is extinguished but the contract of loan remains
b. The acceptance by the pledgor is not necessary for extinguishing contract of pledge
c. The pledgee becomes a depositary upon renunciation if in the meantime, the thing
pledged is not yet returned to the owner
d. The return of the thing pledged is necessary for extinguishing the contract of pledge for
this mode of contract of pledge extinguishment
49. The following are the formalities required for the sale of the thing pledged in case of failure of
the debtor to pay the principal obligation, except
a. It must be public auction
b. It must be through a notary public
c. There must be a notice to the debtor and the owner of the thing pledged, stating the
amount for which the public sale is to be held
d. The thing pledged must be sold by the pledgee at the first auction only
50. Sale of pledged personal property in contract of pledge shall be made in
a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless there is agreement for private auction or sale
d. Generally private auction or sale unless there is agreement for public auction or sale
51. The following persons may bid at the public auction, except
a. The pledgor or owner
b. The pledgee if there are other bidders
c. Third persons
d. The pledgee even if he is the only bidder
52. In case the bids of the pledgor-owner, the pledgee and a third person are equal and
considered the highest bid, who shall be preffered among them?
a. Pledgee
b. Pledgor-owner
c. Third person
53. What is the effect of sale at public auction of the thing pledged?
a. It does not extinguish the contract of pledge
b. The contract of pledge and principal contract of loan obligation shall be extinguished
if the proceeds of the sale are equal to the amount of the principal obligation, interest
and expenses in a proper case
c. The contract of pledge and principal contract of loan shall be extinguished if the
proceeds of the sale exceed the amount of the principal obligation, interest and
expenses in a proper case
d. The contract of pledge and principal contract of loan shall be extinguished whether or
not the proceeds of sale are equal to the amount of the principal obligation, interest and
expenses in a proper case
54. If the proceeds of the sale of the thing pledged in conventional pledged is more than the
amount of the obligation, which of the following statements is true?
a. The debtor-pledgor shall be entitled to the excess unless there is an agreement to the
contrary
b. The creditor –pledgee shall always be entitled to the excess
c. The creditor –pledgee shall be entitled to the excess unless there is an agreement in the
contrary
d. The creditor –pledgor shall always be entitled to the excess

Page 8 of 18
55. If the proceeds of the sale of the thing pledged in conventional pledge is less than the amount
of the obligation, which of the following statements is true?
a. The debtor-pledgor shall always pay for the deficiency
b. The creditor-pledgee cannot recover the deficiency even if stipulated
c. The creditor-pledgee can recover deficiency only if stipulated
d. The debtor-pledgor shall pay for the deficiency if stipulated
56. If the thing pledged is not sold in the first and second public auctions, which of the following
statements is incorrect in case of appropriation by the pledge of the thing pledged?
a. The creditor may appropriate the thing pledged validly
b. The contract of pledge is extinguished if the creditor decided to appropriate the thing
pledged
c. The principal obligation/contract of loan is not extinguished if the creditor decided to
appropriate the thing pledged.
57. DLSU pledged its noted receivable from a parent to a factor on January 1, 2016 with remaining
term of 30 days or maturity date of January 31, 2016. The face value of the notes receivable is
P1,000,000 with maturity value of P1,200,000. The notes receivable is pledged for a notes
payable of P1,100,000 inclusive of interest. If the factor-pledgee collects the P1,200,000 from the
parent on January 31, 206, who shall be entitled for the excess of P100,000?
a. DLSU, the pledgor-debtor
b. Parent
c. Factor, the pledge-creditor
d. None of the above
58. It is a type of pledge which refers to the right of a person to retain a thing until he receives
payment of his claim.
a. Conventional pledge
b. Voluntary pledge
c. Agreed pledge
d. Legal pledge or pledge by operation of law
59. The following are examples of legal pledge, except
a. A professor in good faith may retain the movable upon which he has incurred necessary
and useful expenses until he has been reimbursed therefore.
b. He who has executed work upon movable has a right to retain it by way of pledge until
he is paid.
c. The depositary may retain the thing deposited until the full payment of what may have
been due from him by reason of the deposit.
d. A contract by virtue of which the debtor delivers to the creditor or a third person a
movable, or instrument 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 successions.
60. The provisions on conventional pledge on the possession care and sale of the thing as well as
on the termination of the pledge shall be applicable to legal pledge except with respect to the
sale of the thing as follows. The following are the rules applicable to legal pledge on the sale of
the thing pledged, except
a. The thing may be sold only after demand of the amount for which the thing is retained.
b. The public auction shall take place within one month after such demand
c. If without just grounds, the creditor does not cause the public sale to be held within such
period, the debtor may require the return of the thing.
d. In case there is deficiency from the public sale, the pledge-creditor may still recover the
deficiency even if not stipulated.
e. After payment of debt expenses, the remainder of the price of sale shall be retained by
the pledge-creditor.

Page 9 of 18
61. In case of legal pledge or pledge by operation of law, if the thing held in pledged by operation
of law is sold by the creditor in public auction resulting to excess, who shall be entitled to the
excess?
a. The debtor/owner of the thing sold even if not stipulated
b. The creditor foreclosing party if stipulated
c. The creditor or foreclosing party even if not stipulated
d. The debtor/owner of the thing sold only if stipulated
62. In case of legal pledge or pledge by operation of law, if the thing held in pledged by operation
of law is sold by the creditor in public auction resulting to deficiency, may there be a recovery
of deficiency by the creditor?
a. No even if stipulated because any stipulation for recovery of deficiency in of pledge is
void.
b. Yes even if not stipulated
c. Yes but it must be stipulated by the contracting parties.
d. No because it is pledged by the operation of law.
63. It is a contract whereby the debtor or third person secures to the creditor the fulfillment of a
principal obligation, specially subjecting to such security immovable property or real rights over
immovable property in case the principal obligation is not complied with at the time stipulated.
a. Real estate mortgage
b. Chattel mortgage
c. Pledge
d. Antichresis
64. The following are the essential requisites of a contract of real estate mortgage for its validity,
except
a. That it be constituted to secure the fulfillment of a principal obligation
b. That the mortgagor be the absolute owner of the thing mortgaged.
c. That the person constituting the mortgage must have the free disposal of his property,
and in the absence thereof, that he be legally authorized for the purpose.
d. That the document in which the mortgage appears be recorded in the Registry of
Property.
65. The following are the important characteristics of contract of real estate mortagage, except
a. Accessory- it cannot exist without a principal obligation
b. Indivisible- it creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation is secures has been fully paid.
c. Inseparable- it 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
d. Real right- it creates a lien on the property mortgaged
e. Real contract- It is perfected by the delivery of the thing mortgaged
66. Which of the following statements pertains to equitable mortgage?
a. It is one which created by the agreement of the parties
b. It is one executed pursuant, to an express requirement of a provision of law.
c. It is one which although lacks certain formality, form of words or other requisites provided
by statute, shows the intention of the parties to charge the real property as a security for
a debt and contains nothing contrary to law.
67. The following may become object of contract of real estate mortgage, except
a. Immovable property
b. Real property
c. Rights on immovable property
d. Personal property
68. What is the status of contract of real estate mortgage if the property covered as collateral is a
personal property instead of real property?
a. The contract of real estate mortgage is always void because matter of real estate
mortgage is immovable property
b. The contract of real estate mortgage may be valid as to the contracting parties on the
basis of doctrine of estoppels but the third person directly affected by said void contract
may ask for its declaration of nullity.

Page 10 of 18
 c. The contract of real estate mortgage will be valid to both contracting parties and even
third persons
d. Third persons who are not directly affected by the real estate mortgage may ask for the
declaration of nullity of the real mortgage contract
69. Which of the following statements concerning formalities of real estate mortgage is incorrect?
a. The real mortgage may be in any form it be valid since it is a consensual contract.
b. The real mortgage must be in a public instrument from the convenience of the parties
but not for validity
c. The real mortgage must be registered in the Registry of Property to bind third persons.
d. The real mortgage must be in writing to be valid since it is a formal contract
70. The contract of real estate mortgage shall cover the following (R-I-N-G-I-R), except
a. Real property mortgaged
b. Improvements
c. Natural accessions
d. Growing fruits
e. Indemnity granted or owing to the proprietor from the insurers of the property
mortgaged or in virtue of expropriations for public use
f. Rents and income not yet received when the obligation becomes due
g. Future inheritance of the mortgage
71. The following stipulations concerning real estate mortgage are null and void, except,
a. A stipulation forbidding the owner from alienating the immovable mortgaged.
b. A stipulation providing that the mortgagee shall become the automatic owner of the
property mortgaged upon failure of the debtor to pay the principal obligation
c. Tipo or upset price which refers to price set by the parties as the amount at which the
property will be sold at public auction.
d. A stipulation prohibiting a second mortgage with respect to property registered under
the Torrens System
72. It refers to the right of mortgagor to redeem the mortgaged property after his default of the
performance of his obligation by paying the obligation but before the property is sold in order
to prevent the public sale.
a. Equity of redemption
b. Right of redemption
c. Right of preemption
d. Equity of preemption
73. It refers to the right of mortgagor to repurchase the property within a certain period after it was
sold in public auction for the payment of the mortgage debt.
a. Equity of redemption
b. Right of redemption
c. Right of preemption
d. Equity of preemption
74. It refers to the remedy available to the mortgagee by which he subjects the property
mortgaged to the satisfaction of the obligation secured when the principal obligation is not
paid when due or when there is any violation of any condition, stipulation, or warranty by the
mortgagor.
A. Dation en pago
B. Foreclosure
C. Novation
D. Compensation
75. It is a type of foreclosure made through the filling of a petition in court under Rule 68 of Rules of
Court and availed of when the deed of real estate mortgage does not provide for special
power of attorney (SPA) authorizing the mortgage-creditor to foreclosure it extra-judicially.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure

Page 11 of 18
76. In case of judicial foreclosure, if upon the trial in such action the court shall find the facts set
forth in the complaint to be true, it shall ascertain the amount due to plaintiff upon mortgage
debt or obligation, including interest and other charges as approved by the court, and costs,
and shall render judgment for the sum so found due and order that the same be paid to the
court or to the judgment obligee. This is known equity of redemption of judgment debtor. What
is the period for exercise of equity of redemption in case of judicial foreclosure?
a. Within a period of not less than 90 days nor more than 120 days from the entry of
judgment.
b. Within a period of not less than 1 year nor more than 2 years from the entry of judgment
c. Within a period of not less than 90 days nor more than 1 year from the entry of judgment
d. Within a period of not less than 120 days nor more than 1 year days from the entry of
judgment.
77. In case the judgment debtor in judicial foreclosure failed to exercise his equity of redemption,
the property shall be ordered by the trial court to be sold at public auction. In such case, the
foreclosure sale, generally, when confirmed by an order of the court, shall operate to divest the
rights of all the parties to the action and to vest their rights in the purchaser. May the judgment
debtor still redeem the property already foreclosed and sold in public auction?
a. Yes because he has right of redemption which is 1 year from the confirmation of the
sale.
b. No he can never redeem the property because the equity of redemption has already
expired.
c. Yes because he can exercise his equity of redemption even beyond the 90 days from
entry of judgment or even after the foreclosure sale itself as long as it is prior to the courts
order of confirmation of the sale.
d. Yes because his right of redemption is not subject to a period.
78. Is the right of redemption available to the judgment debtor in case of judicial foreclosure?
a. Yes in all instances
b. No except in those cases provided by special laws
c. No in all instances
d. Yes except in those cases provided by special laws.
79. Under Section 47 of RA 8791, (General Banking Laws), in the event of foreclosure made by
banks, whether judicially or extra-judicially, of any mortgage or real estate which is security for
any loan or other credit accommodation granted, the mortgagor or debtor whose real property
has been sold for the full or partial payment of his obligation shall have the right of redemption.
What is the period for exercise of right of redemption in case of judicial or extra-judicial
foreclosure made by banks?
a. Within one year after the sale of real estate
b. Within 90 days after the sale of the real estate
c. Within 6 months year after the sale of the real estate
d. Within 2 years after the sale of the real estate
80. It is the type of foreclosure made in compliance with Act No. 3135 and available when there is
a stipulation in the mortgage contract that the mortgage may be foreclosed extra-judicially or
when such foreclosure sale is made under a special power of attorney inserted in the contract
authorizing foreclosing extra-judicially.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure
81. Whan a real property is foreclosed and sold under Act No. 3135 in case of extra judicial
foreclosure of Real Estate Mortgage, the public auction sale shall be made at the
a. Province where the property is situated
b. Domicile of the mortgagor
c. Domicile of the mortgagee
d. At any place in the Philippines

Page 12 of 18
82. In all cases of extra-judicial sale made under Act No. 3135 or extra-judicial foreclosure, the
following persons redeem the real property sold in the public auction, except
a. Debtor-mortgagor
b. Successor in interest of debtor-mortgagor
c. Judgment creditor of the debtor-mortgagor
d. Any person having a lien on the real property sold subsequent to the mortgagee or deed
of trust
e. Any third person
83. Sale of foreclosed real property in contract of real estate mortgage shall be made in
a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless there is agreement for private auction or sale
d. Generally private auction or sale unless there is agreement for public auction or sale
84. In case of extra-judicial foreclosure of real property under Act No. 3135, what is the period of
the exercise of right of redemption by the debtor-mortgagor or any other persons authorized by
the said law?
a. Within the term of one year and after the date of sale or registration of the sheriffs
certificate of foreclosure sale.
b. Within the term of 90 days and after the date of extra-judicial sale or registration of the
sheriffs certificate of foreclosure sale
c. Within the term of two years and after the date of extra-judicial sale or registration of the
sheriffs certificate of foreclosure sale.
d. Within the term of six months and after the date of extra-judicial sale or registration of
the sheriffs certificate of foreclosure sale.
85. Notwithstanding Act 3135. Section 47 of RA 8791 (General Banking Laws) provides that juridical
persons whose property is being sold pursuant to an extra-judicial foreclosure by banks, shall
have the right of redemption to be exercised
a. Within 3 months after the foreclosure and sale but not after the registration of the
certificate of foreclosure sale with the applicable Register of Deeds.
b. Within 6 months after the foreclosure and sale but not after the registration of the
certificate of foreclosure sale with the applicable Register of Deeds
c. Within 1 year after the foreclosure and sale but not after the registration of the certificate
of foreclosure sale with the applicable Register of Deeds.
d. Within 2 years after the foreclosure and sale but not after the registration of the
certificate of foreclosure sale with the applicable Register of Deeds.
86. In case the proceeds of the sale from judicial or extra-judicial foreclosure of Real Estate
Mortgage is higher than the principal obligation and costs, which is true?
a. The mortgagee may retain the excess in the absence of stipulation on the contrary
b. The mortgagor is entitled to the excess to the absence of stipulation on the contrary
c. The mortgagee shall always retain the excess
d. The mortgagor shall always recover excess
87. In case the proceeds of the sale from judicial or extra-judicial foreclosure of Real Estate
Mortgage is lower than the principal obligation and costs, which is true?
a. The mortgagee may recover the deficiency in the absence of stipulation to the contrary
b. The mortgagor shall not pay the deficiency in the absence of stipulation to the contrary
c. The mortgagee shall always recover the deficiency
d. The mortgagor shall always pay the deficiency
88. Indicate the proper order on how the proceeds of sale from judicial or extra-judicial foreclosure
of Real Estate Mortgage shall be distributed:
I. Cost of sale
II. Claim of the person foreclosing the mortgage
III. Claims of junior encumbrances in the order of their priority
IV. Mortgagor or his agent
a. I- II-III- IV
b. I- III- II- IV
c. II- I- IV- III
d. III- II- I- IV

Page 13 of 18
89. It is a conditional sale of personal property as security for a payment of a debt, or the
performance of some other obligation specified therein, the condition being that the sale shall
be void upon the seller paying to the purchaser a sum of money or doing some other act
named. If the condition is performed according to its nterms the mortgage and sale
immediately become void, and the mortgagee is thereby divested of his title.
a. Chattel Mortgage
b. Pledge
c. Real Estate
d. Antichresis
90. The following requisites of chattel mortgage for its validity, except
a. That it be constituted to secure fulfillment of a principal obligation
b. That the mortgagor be the absolute owner of the thing mortgaged
c. That the person constituting the mortgage must have the free disposal of his property,
and in the absence thereof, that he be legally authorized for the purpose
d. That the document in which the mortgage appears be recorded in the Chattel
Mortgage Register
e. That an affidavit of good faith must be appended to the Deed of Chattel of Mortgage
and recorded therewith in the Chattel Mortgage Register
91. The following are the important characteristics of contract of chattel mortgage, except
a. Accessory- it cannot exist without a principal obligation or contract of loan
b. Indivisible- it creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation it secures has been fully paid
c. Inseparable- it 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
d. Real contract- it is perfected by delivery of the personal property mortgaged
92. The following may become object of chattel mortgage, except
a. Personal property
b. Movable property
c. Intangible property
d. Real or immovable property
93. The following are the rules for the place of registration of Chattel Mortgage, except
a. As a general rule, it must be recorded in the Chattel Mortgage Register of the province
where the mortgagee resides.
b. It must be recorded in both Chattel Mortgage Registers of the provinces where the
mortgagor resides and where the property is located
c. If the mortgagor is domiciled outside the Philippines, the mortgage must be registered
in the Chattel Mortgage Register where the property is located
d. With respect to motor vehicles, it must be registered with Chattel Mortgage Register
where the mortgagor resides and with Land Transportation Office where the motor
vehicles are recorded.
e. With respect to shares of stock, it must be registered with Chattel Mortgage Register in
the province where the corporation has its principal office and in the Chattel Mortgage
Register of the province of domicile of the mortgagor.
f. With respect to vessel, it must be registered in the office of the Philippine Cost Guard of
the port of the documentation of the vessels.
94. Which of the following statements concerning contract of chattel mortgage is correct?
a. The mortgagee is not obliged to file an independent action for the enforcement of his
credit or loan secured by a chattel mortgage. To do otherwise would defeat the
purpose of the chattel mortgage, which is to give him preference over the mortgaged
chattels for the satisfaction of his credit.
b. A mortgagee who sues and obtains a personal judgment against a mortgagor upon his
credit waives thereby his right to enforce the mortgage securing it and therefore no
longer allowed to foreclose the chattel mortgage.
c. Both a and b
d. Neither a nor b

Page 14 of 18
 95. What is the grace period granted to mortgagor or the minimum period required to lapse from
the time of the breach of the condition in Chattel Mortgage before the mortgagee may extra-
judicial sell or foreclose in the public auction the mortgaged property?
a. At least 30 days
b. At least 60 days
c. At least 90 days
d. At least 120 days
96. When a movable property is foreclosed and sold under Act No. 1508 for Chattel Mortgage, the
public auction sale by a public officer shall be made at the public place of municipality.
a. Domicile of mortgagor
b. Location of movable property
c. Domicile of mortgagee
d. Either a or b
97. Sale of foreclosed personal property in contract of chattel mortgage shall be made in
a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless there is agreement for private auction or sale
d. Generally private auction or sale unless there is agreement for public auction or sale
98. In case the proceeds of the sale from judicial or extra-judicial foreclosure of Chattel Mortgage
is higher than the principal obligation and costs, which is true?
a. The mortgagee may retain the excess in the absence of stipulation to the contrary
b. The mortgagor is entitled to the excess in the absence of stipulation in the contrary
c. The mortgagee shall always recover the deficiency
d. The mortgagor shall always recover the excess
99. In case the proceeds of the sale from judicial or extra-judicial foreclosure of Chattel Mortgage
is lower than the principal obligation and costs, which is true?
a. The mortgagee may recover the deficiency in the absence of stipulation to the contrary
b. The mortgagor shall not pay the deficiency in the absence of stipulation to the contrary
c. The mortgagee shall always recover the deficiency
d. The mortgagor shall always pay the deficiency
100. Indicate the proper order on how the proceeds of sale from judicial or extra-judicial foreclosure
of Chattel Mortgage shall be distributed
I. Cost of sale
II. Claim of the person foreclosing the mortgage
III. Claims of junior encumbrances in the order of their priority
IV. Mortgagor or his agent
a. I- II- III- IV
b. I- III- II- IV
c. II- I- IV- III
d. III- II- I- IV

101. It is a contract whereby 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 of his credit.

a. pledge
b. Chattel Mortgage
c. Real Mortgage
d. Antichresis

102. The following are the important characteristics of contract of antichresis, except
a. Accessory- It cannot exist without the principal obligation or contract of loan
b. Indivisible- it creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation is secures has been fully paid
c. inseparable- it subjects the property upon which it is imposed, whoever the possessor may be
, to fulfillment of the obligation for whose security it was constituted.

Page 15 of 18
 d. Real right- It creates a lien on the property mortgaged.
e. Real contract- It is perfected by the delivery of the thing mortgaged.
103. In contract of antichresis, what shall be the basis of measurement of the fruits in its application to
the interest and principal of the loan?
a. The actual market value of the fruits at the time of the application.
b. The actual market value of the fruits at the time of harvest.
c. The actual market value of the fruits at the time of sale of fruits.
d. The actual market value of the fruits at the time of perfection of the contract of antichresis.
104. What is the nature of the contract of antichresis?
a. It is consensual contract perfected by mere consent.
b. It is real contract perfected by delivery of the real property.
c. It is a formal contract perfected by the execution of the written instrument containing the
antichretic agreement together with the amount of the principal and interest of the loan
105. Who shall be liable to pay the real property taxes and expenses necessary for the repair and
preservation of the real property used as collateral in contract of antichresis?
a. Always antichretic creditor
b. Always debtor
c. Antichretic creditor in the absence of stipulation to the contrary.
d. Debtor in the absence of stipulation to the contrary.
106. Upon non-payment or default of the antichretic debtor of the principal obligation, may the
antichretic creditor automatically appropriate the real property used as security?
a. No, because it is pactum commissorium which is prohibited by law and public policy.
b. Yes , because the prohibition against pactum commissorium is not applicable to contract of
antichresis.
c. Yes, because it is the right of the creditor.
d. Yes if it is agreed upon by the parties.

Comparison of Pledge, Real Mortgage, Chattel Mortgage and Antichresis

Basis of Difference Conventional Real Estate Chattel Mortgage Antichresis
Pledge Mortgage
Type of Contract Real – By delivery Consensual – By Formal – By Formal – By
as to perfection of object mere consent registration of the execution of
contract of written
chattel mortgage agreement of
in the Chattel antichresis with
Mortgage Registry statement of the
amount of
principal and
interest of the
contract of loan.
To bind third Must be in a Must be Must be Must be
persons public instrument neglected to the accompanied by registered in the
showing a Registry of affidavit of good Registry of
description of the Property faith Property
thing pledged
and the date of
the pledge
Object of Movable or Immovable or real Movable or Immovable or real
contract personal property property personal property property
Prohibition Applicable Applicable Applicable Applicable
against pactum
commissorium
Indivisibility of the Indivisible Indivisible Indivisible Indivisible
contract
Remedy of Foreclose security Foreclose security Foreclose security Gather the fruits of
Creditor in case of and sell the and sell the and sell the the land and
Debtor’s default collateral in public collateral in public collateral in public apply the fair
action with the action with the action with the market value of
proceeds to be proceeds to be proceeds to be the fruits at the

Page 16 of 18
 applied to the applied to the applied to the time of
unpaid obligation unpaid obligation unpaid obligation application first to
the interest of the
loan and the
remainder to the
principal of the
loan.
As to deficiency Deficiency can Deficiency can Deficiency can Deficiency can
never be be recovered be recovered be recovered
recovered even if unless there is unless there is through
there is a stipulation to the stipulation to the continuous
stipulation. Any country. contrary. (Except gathering of fruits
stipulation for in case of
recovery of personal property
deficiency is null sold in installment
and void. under Recto Law)
(Exception – Legal
Pledge)
As to excess of Excess belongs to Excess belongs to Excess belongs to Excess fruits
proceeds the pledgee- the mortgagor the mortgagor belongs to the
creditor unless unless there is unless there is owner of the land
there is stipulation stipulation to the stipulation to the or antichresis
to the contrary. contrary. contrary. debtor.
(Exception – Legal
Pledge)
As to The pledgee may The mortgage The mortgage The antichresis
appropriation of appropriate the cannot cannot creditor cannot
property thing pledged if appropriate the appropriate the appropriate the
the same is not thing mortgaged. thing mortgaged. land used as
sold in two public collateral but may
auctions sell the fruits to be
applied to interest
and principal of
loan.
As to selling of The pledgor may The mortgagor The mortgagor The antichretic
property after the only sell the can sell the can sell the debtor can sell
pledge or property with the property. Any property. Any the land.
mortgage by the consent of the stipulation stipulation
owner. pledge. prohibiting the prohibiting the
mortgagor to sell mortgagor to sell
the property is the property is
void. void.
Conduct of sale Public sale only GR: Public sale GR: Public sale No applicable
of foreclosed Exception: Private Exception: Private
property by sale if stipulated sale if stipulated
credito by contracting by contracting
parties parties
Redemption None but pledger Equity of Extrajudicial Not applicable
can prevent the redemption only foreclosure –
public sale by within 30 days Equity of
paying the from default to redemption and
secured pay the secured right of
obligation obligation to redemption
prevent the Judicial
foreclosure sale foreclosure –
Generally equity
of redemption
only unless
provided by
special law

Page 17 of 18
Name of Contract Contract of Contract of Loan Contract of Contract of Lease
Commodatum or Mutuum Deposit
Definition It is a contract It is a contract 1. is a contract It is a contract
wherein one of wherein one of wherein a person wherein one party
the parties the parties receives a thing binds himself to
delivers to delivers to belonging to give another
another, either another money or another, with the enjoyment or use
something not other obligation of of a thing for a
consumable so consumable thing safely keeping it price certain, and
that the latter upon the and of returning for a period which
may use the same condition that the the same and the may be definite or
for a certain time same amount of safekeeping of definite.
and return it. the same kind the thing
and quality shall delivered is the
be paid. principal purpose
of the contract.
Subject Matter 1. Non- 1. Money 1. Consumable 1. Real property
consumable thing 2. Consumable thing 2. Personal
2. Consumable thing 2. Non- property
thing but only for consumable thing
purpose of exhibit
Characteristics 1. Real 1. Real 1. Real 1. Consensual
2. Essentially 2. Onerous if there 2. Onerous if there 2. Onerous
gratuitous is interest or is depositary fee
gratuitous if there or gratuitous if for
is no interest. free.

Page 18 of 18