CREDIT TRANSACTIONS

Course Outline

I. CONTRACTS OF BAILMENT

A. Bailment defined
B. Parties
C. Examples of bailments

II. Title XI – LOAN

General Provisions

Arts. 1933-1934
A. Loan defined
B. Kinds
1. Commodatum
2. Mutuum
C. Characteristics
1. Real
2. Unilateral

D. Distinctions
Commodatum Mutuum
Character Essentially gratuitous Naturally gratuitous
Object Non-fungible object (but may be Object is money or fungible thing
consumable)
Purpose Transfer its use Transfer its ownership
Effect Restoration of the very thing Restoration of an equal quantity
loaned and quality (equivalent amount)
Risk On the lender (as owner) On the borrower (as debtor of a
generic thing)
Personal in character Not personal in character
Referred to as loan for use or Referred to as loan for
temporary possession consumption
Duration May be claimed before the end of May not be claimed until the term
the term if urgently needed expires or is forfeited

III. CHAPTER I
COMMODATUM

Section 1 – Nature of Commodatum

Arts. 1935-1940
I. Contract of Commodatum
A. Concept
a. Cases:
1. Commodatum is essentially gratuitous
Republic vs. Bagtas, 6 SCRA 262
2. Commodatum is for a certain period
 Mina vs. Pascual, Oct. 14, 1913
3. Effect of adverse possession for 11 years
Catholic Vicar vs. CA, 165 SCRA 515
4. Effect of suspension of possessory rights for more than 50 years
Republic vs. CA, 146 SCRA
b. Kinds – Commodatum is divided into
1. ordinary commodatum; and
2. precarium
Cases:
i) if neither the duration of the contract nor the use of the thing
loaned is stipulated
Quintos vs. Beck, No. 46240, November 3, 1939, 69 Phil 108
ii) if the use of the thing is merely tolerated
Catholic Vicar vs. CA, 165 SCRA 515
c. Pactum de commodando (1934)

B. Requisites
a. Capacity
b. Object
c. Consideration
d. Form

C. Characteristics (as a contract)

a. Real
b. Principal
c. Gratuitous
d. Personal in nature

Arts. 1641-1945

I. Rights and obligations of the parties

A. Rights and obligations of the borrower/bailee
a. Rights
b. Obligations/duties
Cases:
1. Effect of failure to return
Quintos vs. Beck, supra
Catholic Vicar Apostolic vs. CA, 165 SCRA 515, supra
De los Santos vs. Jarra, G.R. No. 4150, February 10, 1910

Arts. 1946-1952

I. Rights and obligations of the parties

A. Effects as to the lender
a. To pay extraordinary expenses of preservation
b. To answer for damages to the borrower
1. The lender cannot evade liability by abandonment of the thing

II. Termination
A. Causes of Extinguishment
a. Expiration of the time or use stipulated
 b. Claim of the lender
c. Destruction of the thing
d. Death of the borrower or lender
e. Ingratitude of the borrower

IV. CHAPTER 2
SIMPLE LOAN OR MUTUUM

Arts. 1953-1961

I. Simple loan (Mutuum, loan of consumption)

A. Concept
a. Mutuum vs. commodatum
Chee Kiong Yam vs. Malik, R.G. Nos. L-50550-52, October 31, 1979
b. Mutuum vs. barter
c. Mutuum vs. lease
Tolentino vs. Gonzalez Sy Chiam 50 Phil. 558
d. Mutuum vs. agency:
Liwanag vs. CA, 281 SCRA 225
A. Kinds
a. Gratuitous, and
b. With interest
B. Requisites:
a. Capacity of the parties
b. Object
c. Consideration
d. Form
Case:
1. Accepted promise to deliver something by way of simple loan
Saura Import & Export Co., Inc. vs. DBP, 44 SCRA 445
D. Effects: Obligation of the borrower (only)
a. To return the thing or amount borrowed
1. Rule if the thing borrowed is money
Cases:
i) Payment in currency stipulated
Roño vs. Gomez, 83 Phil 890
ii) Stipulation not to pay while war is going on
Nepomoceno vs. Narciso, 84 Phil 542
iii) Extraordinary inflation or deflation
Equitable PCI Bank vs. Ng Sheung Ngor, G.R. No. 171545,
Dec. 19, 2007
2. If the thing borrowed is not money
b. To pay interest
1. Requisites: Pan Pacific Service Contractors, Inc. vs. Eqitable PCI Bank,
G.R. No. 169975, March 18, 2010
2. Stipulation for legal interest but higher rate is charged:
Espiritu vs. Landrito, G.R. No. 169617, April 4, 2007
3. Liability for contractual/monetary interest after maturity of note
Jardenil vs. Solas,73 Phil 626
 Prisma Construction & Development Corporation vs. Manchavez, G.R.
No. 160545, March 19, 2010
4. Effect if interest is paid even if not stipulated
i) Rule
ii) Exception
Siga-an vs. Villanueva, G.R. No. 173227, Jan. 20, 2009
5. Interest payable in kind
6. Compounding of interest
7. Effect of usurious/unconscionable interest
Carpo vs. Chua, G.R. No. 150773, Sept. 30, 2005
8. What is not considered as interest
Sentinel Insurance Co., Inc. vs. CA, GR L-52482, February 23,
1990
c. Disposition of money borrowed

E. Bank deposits
Cases:
a. Nature of bank deposits
Gopoco Grocery vs. Pacific Coast Biscuit Co., 65 Phil 443
Central Bank of the Phil. vs. Morfe, G.R. No. L-38427, March 12, 1975
Serrano vs. Central Bank of the Phil., 96 SCRA 102-103, GR L-30511, Feb.
14, 1980
b. Liability for failure to return savings deposit
Guingona vs. City Fiscal of Manila, G.R. No. L-60033, April 4, 1984
c. Bank as proper party in complaint for qualified theft
People vs. Puig, G.R. No. 173654, August 28, 2008

V. TITLE XII – DEPOSIT

CHAPTER 1
DEPOSIT IN GENERAL AND ITS DIFFERENT KINDS

Arts. 1962-1967
I. Concept
II. Characteristics (as a contract)
A. Real
B. Naturally gratuitous
C. Primarily for custody
Cases:
a. Effect if balance of commission retained by agent
US vs. Igpuara, G.R. No. L-7593, March 27, 1913, 27 Phil 619
b. Effect if foreign currency deposited is sold by the bank
BPI vs. IAC, 164 SCRA 630
c. Nature of rental of safety deposit box
CA Agro-Industrial Devt. Corp. vs. CA, G.R. No. 90027, March 3, 1993
D. Either unilateral or bilateral
E. Non-use by depositary of the thing deposited
a. Nature of agreement to extend payment of money deposited and to pay
interest
Javellana vs. Lim, 11 Phil 141
F. Object of contractual deposit
III. Kinds
 A. a) Extrajudicial
b) Judicial
B. a) Regular
b) Irregular (may use the thing deposited)
C. Voluntary or necessary

IV. Deposit vs. Sale and Barter

V. Deposit vs. Commodatum

VI. CHAPTER 2
VOLUNTARY DEPOSIT

Section 1 - General Provisions

Arts. 1968-1971
I. Voluntary deposit
A. Kinds
B. Requisites
a. Capacity of the parties
b. Object
c. Formalities

Section 2 - Obligations of the depositary

Arts. 1972-1991
I. Rights and Obligations of the Parties
A. Obligations of the depositary
a. To preserve the thing
1. Agreement that the depositary may use the thing deposited
2. Delegation of custody
3. Change of the manner of deposit
4. Preservation of the value
5. Secrecy of deposit
b. To return the thing
1. To whom
2. What is to be returned
i) If money
ii) If specific thing
iii) If generic thing
3. Form or manner of return
4. Place of return
5. Time of return
6. Set off
i) Right of bank to apply a deposit to the debt of a depositor
Gullas vs. PNB, 62 Phil 519
Associated Bank (Now Westmont Bank) vs. Tan, G.R. No.
156940, Dec. 14, 2004
7. Bank’s failure to return amount
i) Liability for failure to return bank deposit
 Guingona vs. City Fiscal of Manila,G.R. No. L-60033, April 4,
1984
8. When bank officials may be guilty of estafa
Guingona vs. City Fiscal of Manila, 137 SCRA 597 (MR of April 4,
1984 SC decision)
9. Earnest money
i) Obligation if sale did not materialize
Compania Maritima vs. CA, 135 SCRA 594

Section 3 - Obligations of the depositor

Arts. 1992-1995
I. Rights and obligations of the parties
A. Obligations of the depositor
B. Security of the depositary
II. Termination of the contract
A. Extinguishment
a. General causes
b. Other causes

VI. CHAPTER 3
NECESSARY DEPOSIT

Arts. 1996-2004
I. Necessary deposit (1996)
A. Kinds
a. In compliance with legal obligations
b. On the occasion of a calamity
c. By transients
1. Requisites to hold innkeeper/hotel liable
2. When liability commences
3. What liability includes
4. Effect of notices
5. Right of retention
6. Cases:
i) YHT Realty Corp. vs. CA, GR No. 126780, Feb. 17, 2005
ii) Durban Apartments Corporation vs. Pioneer Insurance and Surety
Corporation, G.R. No. 179419, January 12, 2011
d. In common carriers

VII. CHAPTER 4
SEQUESTRATION OR JUDICIAL DEPOSIT

Arts. 2005-2009

I. Judicial deposit (sequestration of property in litigation)

A. Special rule
B. Distinguished from extra-judicial deposit
 Judicial Deposit Extra-Judicial Deposit
As to source By court order By the will of the parties
As to purpose To secure the owner’s right For safe-keeping
As to object May be real or personal Personal property
property
As to cause Remuneratory Generally gratuitous
As to possession For the benefit of the owner For the benefit of the depositor

VIII. CONTRACTS OF SECURITY

I. Basis and rationale

II. Kinds of security contracts
A. Of personal security
1. Guaranty
2. Suretyship
Cases:
i. Nature of undertaking denominated “Guarantor’s Undertaking”
agreeing to be bound jointly and severally
Pacific Banking Corp. vs. IAC, 203 SCRA 495
ii. Nature of “Continuing Guaranty” obligating as surety
E. Zobel Inc. vs. CA, 290 SCRA 1
iii. Guaranty as actually suretyship; distinction between the two
Machetti vs. Hospicio de San Jose, 43 Phil 297

B. Of real security
1. Pledge
2. Real Estate Mortgage
3. Chattel Mortgage
4. Antichresis
III. Causa

IX. TITLE XV – GUARANTY

CHAPTER 1
NATURE AND EXTENT OF GUARANTY

Arts. 2047 – 2048

I. Concept
II. Characteristic features
A. Subsidiary
Cases:
a. Guaranty vs. Suretyship
Ong vs. PCIB, G.R. No. 160466, January 17, 2005
b. Guarantor vs. surety
Castellvi de Higgins vs. Sellner, 4 Phil 142
b. Solidary guarantor vs. solidary co-debtor
Escaño vs. Ortigas, G.R. No. 151953, June 29, 2007
c. Liability where company president signed as guarantor
Piczon vs. Piczon, 61 SCRA 67
 d. Solidary guarantor does not lose his character as such vis-à-vis the debtor
Palmares vs. CA, 288 SCRA 422
B. Consensual
C. Gratuitous or onerous
a. Dismissal of complaint by virtue of compromise agreement where payment of
balance was guaranteed:
Severino vs. Severino, 56 Phil 185

Arts. 2049-2057
I. Kinds
A. By its origin
a. Conventional
b. Legal
c. Judicial
B. By extent
a. Indefinite or Unlimited or Simple
1. Rule if without knowledge or consent of debtor
Case:
Suit to recover from principal debtor who did not consent to the
guaranty
De Guzman vs. Santos, 68 Phil 371
b. Limited
C. By the person guaranteed
D. By the liability of the guarantor
a. Normal
b. Solidary
Cases:
Machetti vs. Hospicio de San Jose, supra
PNB vs. Luzon Surety Co., Inc., 68 SCRA 207
Ong v. PCIB, GR No. 160466, January 17, 2005
International Finance Corporation vs. Imperial Textile Mills, Inc., G.R.
160324, Nov. 15, 2005

II. Elements of guaranty:

A. Parties
a. Qualifications of guarantor
1. If proposed by the debtor
2. If chosen by the creditor
3. Consent
Cases:
i. Rule where there is merely an offer of guaranty:
Texas Co.(Phil), Inc.. vs. Alonzo, 73 Phil 90
ii. Effect of principal has not paid the premium:
Phil. Pryce Assurance Corp. vs. CA, 230 SCRA 164
B. Subject matter and conditions
a. Debts that may be guaranteed:
Municipality of Gasan vs. Marasigan, 63 Phil 510
b. Future debts
Cases:
i. When debt is considered liquidated:
 Selegna Management and Development Corporation vs. UCPB, G.R. No.
165662, May 3, 2006
ii. Comprehensive surety agreement to over existing and future debts:
RCBC vs. Arro, 115 SCRA 777
iii. When guaranty is construed as continuing:
Diño vs. CA, 216 SCRA 9
Bank of Commerce vs. Flores, G.R. No. 174006, December 8, 2010
iv. Retrospective application of guaranty:
Willex Plastic Industries Corp. vs. CA, 256 SCRA 478
C. Form
Cases:
a. Written undertaking to guarantee payment of another person’s obligation:
Macondray & Co., Inc. vs. Piñon, 2 S vs. Marquez, 11 Phil 263
b. Guaranty and suretyship must be express and cannot be presumed:
Wise & Co. vs. Tanglao, 63 Phil 372
c. The terms of a contract of suretyship determine the surety’s liability and
cannot extend to more than what is stipulated therein:
Solon vs. Solon, 64 Phil 729

X. CHAPTER 2
EFFECTS OF GUARANTY

Section 1 – Effects of Guaranty Between

The Guarantor and the Creditor

Arts. 2058-2065

I. Effect of guaranty between creditor and guarantor:

A. Obligation of the creditor
B. Obligation of the guarantor
a. What is to be paid
Cases:
1. Extent of liability when the bond is penal in nature:
General Insurance and Surety Corp. vs. Republic, 7 SCRA 4
2. When surety is liable for interest:
PNB vs. Luzon Surety Co., Inc., 68 SCRA 207
Commonwealth Insurance Corporation vs. CA, G.R. 130886, January 29,
2004
b. When to pay
c. Duty to notify of the payment
C. Privileges of the guarantor:
a. Benefit of exhaustion (excusion)
Cases:
How inability to pay is proved:
Machetti vs. Hospicio de San Jose, supra
Effect of writ of execution against surety who was not impleaded:
Towers Assurance Corp. vs. Ororama Supermarket, 80 SCRA 262
Where surety was impleaded but declared in default:
Finman General Assurance Corp. vs. Salik, 188 SCRA 740
1. When benefit is available
Case:
 Effect when debtor invokes non-exhaustion by guarantor:
JN Dev’t. Corp. vs. Phil. Export and Foreign Loan Guarantee Corp., G.R.
No. 151060, August 31, 2005
2. Effect of benefit
Case:
No execution until writ is returned unsatisfied:
Machetti vs. Hospicio de San Jose, supra
3. When the benefit of exhaustion not available
Cases:
Tupaz vs. CA, G.R. No. 145578, Nov. 18, 2005
Bitanga vs. Pyramid Construction Engineering Corporation, G.R. No.
173526, Aug. 28, 2008
b. Benefit of division
i. General Rule
Case:
Effect if one of the two guarantors paid half of the judgment debt:
De Guzman vs. Santos, GR No. L-45571, June 30, 1939
ii. When division is not available
iii. Time to invoke benefit
iv. When rule applies
Case:
Mira Hermanos vs. Manila Tobacconists, 74 Phil 367
D. Defenses of the guarantor
a. Defenses which pertain to the debtor
b. Defenses peculiar to guaranty

Section 2 – Effects of Guaranty between

The Debtor and the Guarantor

Arts. 2066-2072

I. Effects of guaranty between guarantor and debtor

A. Before payment by the guarantor
a. To receive the compensation
b. To demand relief from the guaranty
1. Instances
c. Prejudice to the creditor’s rights
d. Object of action for relief
Case:
Right of surety to invoke provisions of 2071:
Manila Surety & Fidelity Co. vs. Batu Construction Co., L-9353, May 21, 1957
B. Rights of the guarantor after payment
a. Personal action for reimbursement
1. Extent of recovery
b. Action in subrogation of the creditor
c. The two actions compared
1. Advantage of subrogation
2. Advantages of reimbursement
C. Guaranty given without consent or against the will of the debtor

Section 3 – Effects of Guaranty as

 Between Co-Guarantors

Arts. 2073-2075

I. Effects between co-guarantors

A. Contribution
B. In case of insolvency of one co-guarantor
C. Defenses of co-guarantors

XI. CHAPTER 3

EXTINGUISHMENT OF GUARANTY

Arts. 2076-2081

I. Extinction of guaranty
A. Negligence of the creditor
Case:
Effect if there is impossibility of subrogation:
E. Zobel Inc. vs. CA, GR 113931, May 6, 1998, 290 SCRA 1
B. Extension of payment
a. Requisites
b. Who must grant extension
c. Guarantor’s consent
Cases:
i. Effect of extension of one installment:
Villa vs. Garcia Bosque, 49 Phil 126
ii. Effect of acceleration clause:
Radio Corp. vs. Roa, 52 Phil 926
iii. Effect of extension of time of payment:
Phil. Gen Insurance Co., vs. Mutuc, 61 SCRA 22
d. Effect on accommodation party
Case:
Prudential vs. CA, 143 SCRA 7
e. Mere failure to demand
Case:
Shannon vs. Phil. Lumber & Trans Co., 61 Phil 872
f. Undertaking to hold in abeyance any action
Case:
Cochingyan Jr. vs. R & B Surety and Ins. Co., Inc., 151 SCRA 339
C. Payment of the principal debt by the debtor
Hong Kong-Shanghai Banking Corp. vs. Aldanese, 48 Phil 990
D. Accidental loss of the thing due before default
E. Remission of debt
F. Merger
a. Between creditor and debtor
b. Between creditor and guarantor
c. Between debtor and guarantor
G. Compensation
H. Novation
a. When the principal obligation is extinguished
b. When the principal obligation is modified
 I. Death
a. Of the guarantor
b. Of the debtor
Stronghold Insurance Company, Inc. vs. Republic-Asahi Glass Corporation,
G.R. 147561, June 22, 2006
J. Failure to send notice of default

XII. CHAPTER 4
LEGAL AND JUDICIAL BONDS

Arts. 2082-2084
I. Judicial Guaranty

XIII. TITLE XVI - PLEDGE, MORTGAGE AND ANTICHRESIS

Chapter V – Provisions Common to Pledge and Mortgage

Arts. 2085-2092
I. Common Characteristics (2085)
Case:
Flancia vs. CA, G.R. No. 146997, April 26, 2005
A. Constituted to secure fulfillment of a principal obligation (accessoriness) (2085)
Case:
Mortgage given to secure future advancements:
Mojica vs. CA, 201 SCRA 517, Sept. 11, 1991
B. Constituted only by the absolute owner of the thing pledged or mortgaged
Cases:
Mortgage constituted before issuance of patent to the mortgagor:
Vda. de Bautista vs. Marcos, 3 SCRA 434
Mortgage by surviving spouse of conjugal property:
PNB vs. CA, 98 SCRA 207, June 15, 1980
Property not owned by mortgagor at the time of mortgage:
DBP vs. CA, 253 SCRA 414, Feb. 9, 1996
National Investment and Development Corporation vs. Bautista, G.R. No. 150388,
March 13, 2009
C. Free disposal or legal authority of person constituting the pledge or mortgage
D. Things pledged or mortgaged may be alienated at the instance of the creditor
a. Benefit of exhaustion
Case:
Exhaustion applies only to personal guaranty:
Southern Motors, Inc. Barbosa, L-9306, May 25,1956
b. Pactum commissorium
Cases:
A. Francisco and Development Corp. vs. CA, 298 SCRA 349
Edralin vs. Philippine Veterans Bank, G.R. No. 168523, March 9, 2011
Ong vs. Roban Lending Corporation, G.R. No. 172592, July 9, 2008
E. Pledge and mortgage are indivisible
Cases:
Rule where debt is divisible or debtors are not solidarily liable:
Dayrit vs. CA, 36 SCRA, 548
Separate foreclosure of mortgaged properties:
 Yu vs. PCIBank, GR No. 147902, March 17, 2006
a. Effect of partial payment
F. Promise to constitute pledge or mortgage gives rise to personal action only

XIV. Chapter 2 - Pledge

Arts. 2093-2096
I. Concept
II. Requisites
Case:
Calibo vs. CA, G.R. No. 120528, Jan. 29, 2001
III. Elements:
A. Parties – Capacity
B. Object
Case:
Effect where carabaos pledged not actually delivered to the creditor:
Betita vs. Guanzon, 49 Phil 87, March 29, 1926
a. Incorporeal rights
Case:
Effect of stock assignment:
Lopez vs. CA, 114 SCRA 671, June 29, 1982
Paray vs. Rodriguez, G.R. No. 132287, January 24, 2006
b. Effect if credit pledged becomes due
C. Consideration
a. As to the debtor
b. As to the pledgee
D. Form
a. To affect third persons
Case:
Effect of pledge not in a public instrument:
Betita vs. Guanzon, supra
IV. Classes
A. Voluntary
B. Legal

Arts. 2097-2130
I. Effects as to the pledgee
A. Rights of the pledgee
a. Retention of the thing
1) Use of the thing
2) Deposit of the thing
b. Reimbursement
c. Compensation of fruits with what is due the creditor
d. Actions of recovery and defense
e. Preference of credit
f. Sale of the security
1) Grounds
i) Precautionary
ii) Foreclosure
2) Modes of foreclosure
i) Judicial
 ii) Extra judicial
aa) Procedure
3) Rule if two or more things are pledged
4) Options of the pledgee
g. Collect credits pledged
B. Obligations of the pledgee
a. Preservation
1) Degree of diligence
2) Liability for acts of agents/employees
3) Deposit of the thing pledged
4) In case of danger to the thing pledged
5) Danger of loss through negligence of pledgee
6) In case of fear of destruction or impairment of the thing
b. Restitution
1) When
Case:
Sarmiento and Villaseñor vs. Javellana, 43 Phil 884, Oct. 2, 1922
2) Effect of return of the thing to pledgor
i) Effect of contrary stipulation
ii) Presumption if thing is in possession of the pledgor
II. Effects as to the pledgor
A. Rights of the pledgor
a. Remains the owner
b. May demand deposit of the thing
c. May substitute another thing
d. To bid and to preference at foreclosure sale
e. To the return of the thing
A-1 Rights of pledgor who is not the principal debtor
Case:
Southern Motors , Inc. vs. Barbosa, supra
B. Obligations of the pledgor
a. To notify the pledgee of flaws
III. Extinguishment of the pledge
A. Extinction of principal obligation
B. Destruction or loss
C. Return
D. Renunciation
E. Redemption
F. Other causes

Arts. 2121-2122

I. Legal Pledges (Right of retention)

A. Governing rules
B. Cases of retention
a. Possessor in good faith
b. Usufructuary
c. Agent
d. Mechanics lien
e. Depositary
f. Hotelkeeper

Art. 2123
I. Laws/Rules governing pawnshops

XV. Chapter 3 - Mortgage (Real Estate)

Arts. 2124-2131
I. Concept
A. As a right
B. As a contract
II. Elements
A. Parties
B. Object
C. Consideration
D. Form
a. For validity
Cuyco vs. Cuyco, G.R. No. 168736, April 19, 2006
b. Between the parties
Effect of unregistered mortgage between the parties:
Mobil Oil Phil. Inc. vs. Diocares, 29 SCRA 656, Sept. 30, 1969
c. As to strangers
Validity of private document evidencing mortgage:
Hechanova vs. Adil, G.R. L-49940, Sept. 25, 1986

F. Supplementary Laws
III. Classes
A. Voluntary
B. Legal
C. Equitable mortgage
IV. Effects
A. As to the property mortgaged
a. Creation of real right
Cases:
1. Effect of sale of mortgaged property:
Bonnevie vs. CA, 125 SCRA, 122, October 24, 1983
2. Right to foreclose when land was sold after the mortgage
Paredes vs. CA, G.R. No. 147074, July 15, 2005
3. Effect of death of mortgagor:
Jacob vs. CA, 184 SCRA 294, April 6, 1990
b. Extension to accessions and accessories
Cases:
1. Effect of mortgage of hacienda:
Bischoff vs. Pomar, 12 Phil 690, Feb. 2, 1909
2. Effect of mortgage of lots on houses built thereon:
Paderes vs. CA, G.R. No. 147074-75, July 15, 2005
c. Pactum de non alienando
Cases:
Servicewide Specialists, Inc. vs. CA, G.R. No. 116363, Dec. 10,
1999
Go Cinco vs. CA, G.R. No. 151903, Oct. 9, 2009
B. Effects as to the mortgagee
Case:
Where mortgagee transferred his credit:
 Bischoff vs. Pomar, supra

V. Foreclosure – Modes
A. Judicial (See Rule 68, Rules of Court)
B. Extrajudicial
a. Procedure (See. A.M. No. 99-10-05-0, Aug. 7, 2001)
b. Deficiency rule
Cases:
DBP vs. Licuanan, GR No. 150097, February 26, 2007
PNB vs. Rocamora, G.R. No. 164549, September 18, 2009
VI. Redemption
A. Rules
a. Judicial foreclosure
b. Extrajudicial foreclosure
c. Right of redemption vs. equity of redemption
Case:
Huerta Alba Resort, Inc. v. Court of Appeals, G.R. No. 128567, Sept. 1,
2000
B. How done
Banco Filipino vs. CA, GR No. 143896, July 8, 2005
C. What is to be paid
Case:
China Banking Corp. v. CA, G.R. No.129644, 7 September 2001
Effect of tender of less than the purchase price:
BPI vs. Sps. Veloso, G.R. No. 141974, August 9, 2004
D. Effect of death of mortgagor
E. Remedies of mortgagee in equitable mortgage

XVI. Chapter 4 - Antichresis

Arts. 2132-2139
I. Concept
A. Similarities and differences with Real Estate Mortgage
a. Similarities
b. Differences
II. Elements
A. Parties
B. Object
C. Causa
D. Formalities
III. Effects
A. Rights of the antichretic creditor
a. To receive the fruits
b. Right of foreclosure
B. Obligations of the antichretic creditor
a. To bear necessary expenses
b. To pay taxes
1) Reason
2) Exception
3) Effect of non-fulfillment
C. Case:
 Diego vs. Fernando, 109 Phil 143, August 25, 1960

XVII. Chapter 5 - Chattel Mortgage

Arts. 2140-2141

I. Concept (Art. 2140 and Act. 1508)

II. Nature and characteristics (See common characteristics)
A. Obligations that may be secured:
Case:
Acme Shoe, Rubber & Plastic Corp. vs. CA, G.R. No. 103576, August 22, 1996
III. Elements
A. Parties
B. Object
Cases:
Manarang vs. Ofilada, 99 Phil 108, May 18, 1656
Tumalad vs. Vicencio, 41 SCRA 143
Makati Leasing and Finance Vorp. Vs. Wearever Textile Mills, Inc. 122 SCRA 296,
May 16, 1983
Jaca vs. Davao Lumber Co., 113 SCRA 107, March 29, 1982
C. Causa
D. Form
a. To bind the parties
b. To bind third persons - additional requirements:
1) Affidavit of good faith
Cases:
Giberson vs. Jureidini Bros., 44 Phil 216, DEce.ber 21, 1922
Jaca vs. Davao Lumber Co., 113 SCRA 107, March 29, 1982
Cebu Int’l. Finance Corp. vs. CA, G.R. No. 107554, February 13, 1997
2) Description of the property
Case:
Saldaña vs. Phil. Guaranty Co., 106 Phil 909, Jan. 29, 1960
3) Registration
i) Place
aa) General rule
bb) Exceptions
IV. Effect of mortgage
A. What it covers
a. Exception
V. Discharge of mortgage (Sec. 8, Act. 1508)
A. Requisites
B. Effect of failure to discharge
VI. Redemption (before foreclosure) (Sec. 13, Ac. 1508)
A. Who may redeem
B. What must be paid
C. Effects of redemption
VII. Foreclosure
A. Kinds
a. Judicial
b. Extra-judicial
1) Procedure (See. A.M. No. 99-10-05-0, Aug. 7, 2001)
2) Disposition of proceeds
i) Application
 ii)In case of deficiency
Case:
Pameca Wood Treatment Plant, Inc. vs. CA, GR No. 106435,
July 14, 1999
PNB vs. Rocamora, supra
iii. In case of sale of personal property on installments (Art. 1484)
B. Right of redemption
Case:
Paray vs. Rodriguez, G.R. No. 132287, January 24, 2006

VIII. Distinctions:

As to Pledge Chattel Real Mortgage Antichresis

Mortgage
Object On movables On movables On immovables On immovables
Possession By the creditor By the debtor By the debtor By the creditor
Perfection Real contract Formal contract Formal contract Formal contract
Form to bind Public Recorded public Recorded public Recorded public
third parties instrument instrument instrument instrument
containing
description of
the thing
pledged and the
date thereof

XVIII. Title XIX - Concurrence and Preference of Credits

Chapter 1 - General Provisions

Arts. 2236-2240
I. Concept and General Theory
A. Concurrence
B. Preference
C. Property not subject to preference and concurrence

Chapter 2 - Classification of Credits

Arts. 2241-2245
I. Classification of credits
A. General classification
a. Absolutely preferred
b. Specially preferred
c. Ordinary preferred
d. Common credits
B. As to specific movable property
a. Duties, taxes, etc.
b. Claims arising from misappropriation, etc.
c. Claim for unpaid price of movables sold
d. Credits guaranteed by
1) Pledge
 2) Chattel mortgage
e. Refectionary credits
f. Claims for laborer’s wages
g. Other claims and credits
C. Rules as to preferred credits on specific movables
D. As to specific immovable property
E. Ordinary preferred credits

XIX. Chapter 3 - Order of Preference of Credits

Arts. 2246-2251
I. Order of payment
A. Resumè:
a. Absolutely preferred credits
b. Specially preferred credits
1) As to specific chattels
2) As to specific immovables
c. Ordinary preferred credits
d. Non-preferred credits

XX. SPECIAL LAWS RELATED TO CONTRACTS OF DEPOSIT

I. Act No. 2137, Warehouse Receipts Law

II. Act No. 3893, Bonded Warehouse Act

III. PD No. 115, Trust Receipts Law

XXI.

I. Act No. 1956, The Insolvency Law

Suggested Book: Comments and Cases on Credit Transactions by De Leon

Reference: Course Syllabus prepared by Judge Quirante.