REY DANIEL S.

ACEDILLO
Midterm Exam Credit Transactions
1.
[a]
The contract is void for being in the nature of a pactum commissorium which is
prohibited under Article 2088 of the Civil Code.
Article 2088 provides, The creditor cannot appropriate the things given by the
way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and
void.
In this case, the stipulation that if Rosario is unable to redeem the ring on due
date, she will execute a document in favor of Jennifer providing that the ring shall
automatically be considered full payment of the loan, is tantamount to an automatic
conveyance of the property to the creditor. Such stipulation is prohibited and the creditor
is not allowed to acquire ownership of the property given as security without need of
public sale or foreclosure required by law.
[b]
Yes, the contract is still not valid.
Article 2112 of the Civil Code provides for the proper procedure to be undertaken
by the creditor in case of failure of the debtor to pay his loan. It provides, 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.
Jennifer must follow this procedure instead of immediately selling the ring and
appropriating the entire proceeds thereof for herself. Only after failure to sell the thing
twice at two separate public auctions may Jennifer appropriate the thing pledged and in
such case she shall be obliged to give an acquittance for his entire claim.

2.
[a]
No. There can only be compensation when the parties are mutually creditors and
debtors of each other and that both their obligations are due, demandable and liquidated.

It cannot be said in this case that the amount of the monthly rentals which is based on a
monthly period is liquidated nor due and demandable.
[b]
Yes. As a co-signatory who is individually and collectively liable under the
promissory note, he may be liable to pay for part or for the whole amount of the debt in
case his co-signatory fails to pay his share. Eduardo and Ricardo are jointly and severally
liable to pay the obligation under the promissory note. Since Eduardo failed to pay the
obligation, XYZ bank may choose to collect from either Eduardo or Recardo or both. In
this case, XYZ chose to foreclose on the mortgage executed by Recardo.
[c]
There is no novation because there was no change in the persons of the original
parties or in the characteristic of the obligation. Ricardos obligation as a guarantor still
subsists despite the fact that XYZ bank stopped payment of the rentals after Eduardo
defaulted on the payment of the promissory note.
Under Article 1292, In order that an obligation may be extinguished by another
which substitute the same, it is imperative that it be so declared in unequivocal terms, or
that the old and the new obligations be on every point incompatible with each other.
In this case, Recardos obligation as a co-signatory to the promissory note is
independent from the the obligations that exist between Eduardo and XYZ bank
regarding the liability of Eduardo under the promissory note and the obligation of XYZ
bank to pay the rentals pursuant to the lease agreement.
3.
[a]
No. Since Gustavo accepted the tender of the check as payment, he is now
estopped from claiming that the check is not legal tender.
[b]
Yes. The delivery by Felipe and acceptance by Gustavo of the check had the
effect of payment even though it was not cashed because it was through the fault of
Gustavo that the check was impaired. The debt must be considered as already paid and
the obligation extinguished.

[c]
Yes. Felipe can compel Gustavo to receive the 100 US Dollars for it was the
original loan in its original currency at the time of the establishment of the obligation. In
order that inflation or deflation may be considered to modify the amount of the loan
accordingly, the supervening inflation or deflation must be of an extraordinary character.
4.
[a]
Yes. Dehlma relied on the Torrens Certificate of Title which is incontrovertible
and indefeasible as to its validity, and only the mortgage to Elaine was annotated on the
title when she checked with the Register of Deeds. She even gave an advanced payment
so that the mortgage on the property was released. All these instances show that Dehlma
was a purchaser in good faith.
In the absence of any prior knowledge of any liens or encumbrances or defect on
the title on Dehlmas part constitutes good faith. A valid lien is annotated at the back of
the title which forewarns the buyer but in this case the only annotation was the mortgage
to Elaine. It is not necessary that Dehlma go beyond the face of a certificate of title,
unlike the diligence of banking institutions which is extraordinary.
[b]
Being the purchaser of the property in a judicial foreclosure ahead of the sale
between Juliet and Dehlma, XYZ has a better right to the house and lot.
On the other
hand, Dehlma may redeem said propertyfrom XYZ bank, as long as it is still within the
redemption period, by paying the purchase price of the property.
[c]
Since the mortgage foreclosed by the bank covers only the house and lot or the
immovable, by virtue of deed of sale entered into by Dehlma and Juliet, Dehlma owns the
movables inside the house.
5.
[1]
e) letters a and b

[2]

c) a necessary deposit;
[3]
d) all of the above;
6.
Under Art. 1602 of the Civil Code, a contract shall be presumed to be an equitable
mortgage, in any of the following cases:
(1)
(2)
(3)
(4)
(5)
(6)

When the price of a sale with right to repurchase is unusually inadequate;

When the vendor remains in possession as lessee or otherwise;
When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
When the purchaser retains for himself a part of the purchase price;
When the vendor binds himself to pay the taxes on the thing sold;
In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.

The case at bar does not fall under any of the above enumerated instances. The
first contract executed by Pedro and Juan is an absolute deed of sale there being no debt
or obligation on the part of Pedro that would make mortgage of the property necessary.
Pedros possession of the property after the deed of sale was executed is based on the
contract of lease which is independent of the contract of sale.