Professional Documents
Culture Documents
Credit Transactions:
Notes and Cases
Volume I
STEPHANIE V. GOMEZ-SOMERA
by
and
STEPHANIE V. GOMEZ-SOMERA
0
WITH GRATITUDE
Stephanie V. Gomez-Somera
PREFACE
VOLUME I
Preface ........................................................................................... v
PART I. LOAN
VOLUME I
Preface ........................................................................................... v
14 Qua Chee Gan v. Law Union & Rock Insurance Co., Ltd., G.R. No. L-
4611, December 17,1955,98 Phil 85.
15 Ong Yiu v. Court of Appeals, G.R. No. L-40597, June 29,1979,91 SCRA
223.
16 Tolentino v. Court of Appeals, G.R. No. 171354, March 7, 2007, 517
SCRA 732. It should be noted, however, that contracts of adhesion are
sometimes amended by separate contracts, usually a letter-agreement,
belying the view that the ready-made form of the contract may only be
accepted or rejected in its entirety.
17 Ibid.
The Concept of Credit 11
18 Qua Chee Gan v. Law Union & Rock Insurance Co., Ltd., G.R. No. L-
4611, December 17, 1955,98 Phil 85.
19 Tolentino v. Court of Appeals, G.R. No. 171354, March 7, 2007, 517
SCRA 732.
20 Ibid.
n Ferguson, The Ascent of Money 14-31 (2009).
12 1 Credit Transactions: Notes and Cases
the trust and confidence that they had in the creditors that
issued the new security, even though the underlying asset
that backed this security was a loan and mortgage ex-
ecuted by a debtor in whom no evaluation of trust and
confidence was made. 24
The key is, and always will be, in the words of Justice
Malcolm, confidence and trust.
A. General Concepts
I The provisions of the Civil Code that govern the contract of loan fall under
Book IV on Obligations and Contracts.
16 I Credit Transactions: Notes and Cases
2 Civil Code, Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3)
Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-
delicts.
3 Civil Code, Art. 1642. The contract of lease may be of things, or of work
and service.
Art. 1643. In the lease of things, one of the parties binds himself to give to
another the enjoyment or use of a thing for a price certain, and for a period
which may be definite or indefinite. However, no lease for more than nine-
ty-nine years shall be valid.
Art. 1644. In the lease of work or service, one of the parties binds himself to
execute a piece of work or to render to the other some service for a price
certain, but the relation of principal and agent does not exist between them.
Art. 1645. Consumable goods cannot be the subject matter of a contract of
lease, except when they are merely to be exhibited or when they are acces-
sory to an industrial establishment.
4Blacks Law Dictionary, Ninth Edition (2009).
The Concept of Loan I 17
1. Obligation to Deliver
5 Ibid.
6 Ibid.
7 Civil Code, Art 1316. Real contracts, such as deposit, pledge and commo-
datum, are not perfected until the delivery of the object of the obligation.
18 1 Credit Transactions: Notes and Cases
2. Object of a Loan
3. Consideration of a Loan
9 Rose Packing Company, Inc. v. Court of Appeals, G.R. No. L-33084, No-
vember 14,1988,167 SCRA 309.
10
Blacks Law Dictionary, Ninth Edition (2009).
The Concept of Loan 1 25
B. Contract to Loan
use of the credit card and will also make cash loans
available to the cardholder. It also states that the
cardholder shall be liable to the bank for advances
and payments made by the bank and that the
cardholder's obligation to pay the bank shall not be
affected or impaired by any dispute, claim, or de-
mand by the cardholder with respect to any mer-
chandise or service purchased.
The merchants participating in the system agree to
honor the bank's credit cards. The bank irrevocably
agrees to honor and pay the sales slips presented
by the merchant if the merchant performs his un-
dertakings such as checking the list of revoked
cards before accepting the card...
These slips are forwarded to the member bank
which originally issued the card. The cardholder
receives a statement from the bank periodically
and may then decide whether to make payment to
the bank in full within a specified period, free of in-
terest, or to defer payment and ultimately incur an
interest charge.
A. General Concepts
provided the child returns the very same toy to the play-
mate.
1. Consideration in Commodatum
2. Object of Commodatum
B. Parties to a Commodatum
1. Ownership by Bailor
2. Use by Bailee
1. Ordinary Expenses
Art. 1943. The bailee does not answer for the de-
terioration of the thing loaned due only to the use
thereof and without his fault.
2. Extraordinary Expenses
3. Other Expenses
4. Abandonment by Bailor
4 Ortiz v. Kayanan, et a., G.R. No. L-32974, July 30,1979,92 SCRA 146.
82 1 Credit Transactions: Notes and Cases
E. Obligation to Return
A. General Concepts
5 Civil Code, Art. 1638. By the contract of barter or exchange one of the par-
ties binds himself to give one thing in consideration of the other's promise
to give another thing.
Art 1641. As to all matters not specifically provided for in this Title (on
barter), barter shall be governed by the provisions of the preceding Title re-
lating to sales.
96 1 Credit Transactions: Notes and Cases
B. Obligation to Pay
C. Interest
1. Conventional Interest
16 Act No. 2655 (1916), An Act Fixing Rates of Interest Upon Loans and Dec-
laring the Effect of Receiving or Taking Usurious Rates and for Other Pur-
poses, as amended by Presidential Decrees No. 116, 858, and 1684, is gen-
erally know as the Usury Law.
17 Currently 12% for loans and forbearance of money, goods, or credits pur-
suant to Central Bank Circular No. 416, series of 1974, which was issued
and promulgated by the Monetary Board pursuant to the authority granted
to the Central Bank by P.D. No. 116, which amended the Usury Law.
18 Blacks Law Dictionary, Ninth Edition (2009).
114 1 Credit Transactions: Notes and Cases
19 Ibid.
2DWebster Third New International Dictionary (2002).
21 Blacks Law Dictionary, Ninth Edition (2009).
Simple Loan I 115
22 Frias v. San Diego-Sison, G.R. No. 155223, April 3,2007,520 SCRA 244.
23 Blacks Law Dictionary, Ninth Edition (2009).
24 Ibid.
25
Central Bank Circular No. 416, series of 1974.
116 1 Credit Transactions: Notes and Cases
27 Civil Code, Article 1308. The contract must bind both contracting parties;
its validity or compliance cannot be left to the will of one of them.
28 Philippine National Bank v. Rocamora, G.R. No. 164549, September 18,
2009, 600 SCRA 395.
118 1 Credit Transactions: Notes and Cases
In this case, the phrase "for the last six months on-
ly" should be taken in the context of the entire
agreement. We agree with and adopt the CA's in-
terpretation of the phrase in this wise:
Their agreement speaks of two (2) periods of six
months each. The first six-month period was given
to plaintiff-appellee (respondent) to make up her
mind whether or not to purchase defendant-
appellant's (petitioner's) property. The second six-
month period was given to defendant-appellant to
pay the P2 million loan in the event that plaintiff-
appellee decided not to buy the subject property in
which case interest will be charged "for the last six
months only", referring to the second six-month
period. This means that no interest will be charged
for the first six-month period while appellee was
making up her mind whether to buy the property,
but only for the second period of six months after
appellee had decided not to buy the property. This
is the meaning of the phrase "for the last six
months only". Certainly, there is nothing in their
agreement that suggests that interest will be
charged for six months only even if it takes defen-
dant-appellant an eternity to pay the loan.
2. Interest on Interest
34Ibid.
35
Central Bank Circular No. 416, series of 1974.
132 1 Credit Transactions: Notes and Cases
36 12% for loans and forbearance of money, goods, or credits pursuant to Cen-
tral Bank Circular No. 416, series of 1974.
Simple LoanI 133
37
Blacks Law Dictionary, Ninth Edition (2009).
134 I Credit Transactions: Notes and Cases
38
Civil Code, Art. 1306. The contracting parties may establish such stipula-
tions, clauses, terms and conditions as they may deem convenient, pro-
vided they are not contrary to law, morals, good customs, public order, or
public policy.
3 Ligutan v. Court of Appeals, G.R No. 138677, February 12,2002,376 SCRA
560.
Simple Loan 1 135
40
As properly stated in State Investment House, Inc. v. Court of Appeals,
G.R. No. 90676, June 19,1991,198 SCRA 390: "...in the absence of a stipula-
tion of a particular rate of penalty interest, then the payment of additional
interest at a rate equal to the regular monetary interest; and if no regular
interest had been agreed upon, then payment of legal interest.."
136 1 Credit Transactions: Notes and Cases
41
Reinsurance Company of the Orient, Inc. v. Court of Appeals, G.R. No. L-
61250, June 3,1991,198 SCRA 19, and State Investment House, Inc. v. Court
of Appeals, G.R. No. 90676, June 19,1991,198 SCRA 390.
42 Central Bank Circular No. 416, series of 1974.
Simple Loan 1 137
4. Finance Charges
44 R.A.No. 3765 (1963), The Truth in Lending Ac; its declared policy is to pro-
tect the State's "citizens from a lack of awareness of the true cost of credit
to the user by assuring a full disclosure of such cost with a view of prevent-
ing the uninformed use of credit to the detriment of the national economy."
45 RA. No. 3765 (1963), Sec. 3 (4) ... any person engaged in the business of
extending credit (including any person who as a regular business practice
make loans or sells or rents property or services on a time, credit, or in-
stallment basis, either as principal or as agent) who requires as an incident
to the extension of credit, the payment of a finance charge.
46 LA. No. 3765 (1963), Sec. 3 (1) ...
the Monetary Board of the Central Bank
of the Philippines.
Simple Loan 1 157
Error in Computation
UCPB asserts that while both the RTC and the
Court of Appeals voided the interest rates imposed
by UCPB, both failed to include in their computa-
tion of the outstanding obligation of the spouses
Beluso the legal rate of interest of 12% per annum.
Furthermore, the penalty charges were also deleted
in the decisions of the RTC and the Court of Ap-
peals. Section 2.04, Article II on "Interest and other
Bank Charges" of the subject Credit Agreement,
provides:
Section 2.04 Penalty Charges. In addition to the
interest provided for in Section 2.01 of this AR-
TICLE, any principal obligation of the CLIENT he-
reunder which is not paid when due shall be sub-
ject to a penalty charge of one percent (1%) of the
amount of such obligation per month computed
from due date until the obligation is paid in full. If
the bank accelerates the ... payment of availments
hereunder pursuant to ARTICLE VIII hereof, the
penalty charge shall be used on the total principal
amount outstanding and unpaid computed from
the date of acceleration until the obligation is paid
in full.
166 1 Credit Transactions: Notes and Cases
5. Usury
a. General Concepts
5112% for loans and forbearance of money, goods, or credits pursuant to Cen-
tral Bank Circular No. 416, series of 1974.
180 1 Credit Transactions: Notes and Cases
5
2 Radin, Handbook of Roman Law 182-188 (1927).
182 1 Credit Transactions: Notes and Cases
But Central Bank Circular No. 905 did not repeal nor in
any way amend the Usury Law as it simply suspended its
effectivity. Since the illegality of usury is wholly the crea-
ture of legislation, a Central Bank circular cannot repeal
the illegality of usury. 5 In the event the Monetary Board
of the Central Bank re-imposes ceilings on the rate of in-
terest on loans or forbearance of money, goods, or credits,
then the provisions of the Usury Law shall again be effec-
tive.
53
Ferguson, The Ascent of Money 36-37 (2009).
54 Liam Law v. Olympic Sawmill Co. & CLi, G.R. No. L-30771, May 28, 1984,
129 SCRA 439.
55
First Metro Investment Corporation v. Este Del Sol Mountain Reserve, Inc.,
et al., G.R. No. 141811, November 15, 2001, 369 SCRA 99.
Simple LoanI 183
b. Usurious Acts
c. Remedies
Emata v. Intermediate Appellate Court, et al., G.R. No. L-72714, June 29,
1989,174 SCRA 464.
57
First Metro Investment Corporation v. Este Del Sol Mountain Reserve, Inc.,
et al., G.R. No. 141811, November 15,2001,369 SCRA 99.
186 I Credit Transactions: Notes and Cases
ment for not less than thirty days nor more than
one year, or both, in the discretion of the court,
and to return the entire sum received as interest
from the party aggrieved, and in the case of non-
payment, to suffer subsidiary imprisonment at
the rate of one day for every two pesos:
Provided, That in case of corporations, associa-
tions, societies, or companies the manager, ad-
ministrator or gerent or the person who has
charge of the management or administration of
the business shall be criminally responsible for
any violation of this Act.
58 Civil Code, Art. 1411. When the nullity proceeds from the illegality of the
cause or object of the contract, and the act constitutes a criminal offense,
both parties being in pari delicto, they shall have no action against each oth-
er, and both shall be prosecuted. Moreover, the provisions of the Penal
Code relative to the disposal of effects or instruments of a crime shall be
applicable to the things or the price of the contract
This rule shall be applicable when only one of the parties is guilty; but the
innocent one may claim what he has given, and shall not be bound to
comply with his promise.
190 I Credit Transactions: Notes and Cases
1) Remedy of Debtor
w Angel Jose Warehousing Co., Inc. v. Chelda Enterprises & Syjueco, G.R.
No. L-25704, April 24, 1968, 23 SCRA 119 and First Metro Investment Cor-
poration v. Este Del Sol Mountain Reserve, Inc., et al., G.R. No. 141811,
November 15,2001,369 SCRA 99.
60 Angel Jose Warehousing Co., Inc. v. Chelda Enterprises & Syjueco, G.R.
No. L-25704, April 24,1968, 23 SCRA 119.
Simple Loan 1 191
that case, if the entity sued shall not file its answer under
oath denying the allegation of usury, the defendant shall
be deemed to have admitted the usury. The provision
does not apply to a case where it is the defendant, not the
61
plaintiff, who is alleging usury.
2) Remedy of Creditor
61 Liam Law v. Olympic Sawmill Co. & Ci, G.I. No. L-30771, May 28, 1984,
129 SCRA 439.
62
Angel Jose Warehousing Co., Inc. v. Chelda Enterprises & Syjueco, G.R.
No. L-25704, April 24,1968, 23 SCRA 119, citing Civil Code, Article 2209.
192 I Credit Transactions: Notes and Cases
205
206 1 Credit Transactions: Notes and Cases
3 Civil Code, Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3)
Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-
delicts.
4 Civil Code, Art 2142. Certain lawful, voluntary and unilateral acts give rise
to the juridical relation of quasi-contract to the end that no one shall be un-
justly enriched or benefited at the expense of another.
Chapter 2. Voluntary Deposit
A. General Concepts
B. Obligation to Safekeep
a. Liability of Depositary
b. Liability of Depositor
C. Obligation to Return
2. What to Return
3. Where to Return
4. When to Return
5. Right of Retention
5
See Ortiz v. Kayanan, et al., G.R. No. L-32974, July 30,1979.
Chapter 3. Necessary Deposit
A. General Concepts
1 Civil Code, Art 2142. Certain lawful, voluntary and unilateral acts give rise
to the juridical relation of quasi-contract to the end that no one shall be un-
justly enriched or benefited at the expense of another.
Necessary Deposit I 245
4. Hotels or Inns
A. General Concepts
1. Obligation to Deliver
3. Warehouseman's Lien
D. Criminal Liability
8 Act No. 3893 (1932), as amended by Republic Act No. 247 (1948), The Gen-
eral Bonded Warehouse Act,.
290 1 Credit Transactions: Notes and Cases
A. General Concepts
1 Samo v. People of the Philippines, et al., G.R. No. L-17603-04, May 31, 1962,
5 SCRA 354, and Vintola & Vintola v. Insular Bank of Asia & America, G.R.
No. L-73271, May 29, 1987, 150 SCRA 578, which characterized a trust re-
ceipt as a security transaction.
2 Navoa & Navoa v. Court of Appeals, et al., G.R. No. 59255, December 29,
1995,251 SCRA 545.
3 R. A. No. 8799 (2000).
305
306 1 Credit Transactions: Notes and Cases
It includes:
(a)... bonds, debentures, notes, evidences of in-
debtedness, asset-backed securities...
As has been discussed 4, bonds, notes, and debentures are
evidences of indebtedness and are the common commer-
cial forms that contracts of loan take.5 In the context of
the Securities Regulation Code, therefore, theses contracts
of simple loan or mutuum, are securities, 6 whether they
are secured or unsecured.
B. Events of Default
A. General Concepts
8
Blacks Law Dictionary, Ninth Edition (2009).
9 Transfield Philippines, Inc. v. Luzon Hydro Corporation Australia et al.,
G.R. No. 146717, November 22,2004.
10 FEATI Bank & Trust Company v. Court of Appeals & Villaluz, G.R No.
94209, April 30,1991,1% SCRA 576.
Letters of Credit 1 317
D. Independence Principle
11 Ibid.
318 1 Credit Transactions: Notes and Cases
12Ibid.
Chapter 3. Trust Receipts
A. General Concepts
3 Civil Code, Art. 1356. Contracts shall be obligatory, in whatever form they
may have been entered into, provided all the essential requisites for their
validity are presenL However, when the law requires that a contract be in
some form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and indispensable. In
such cases, the right of the parties stated in the following article cannot be
exercised.
Art 1357. If the law requires a document or other special form, as in the
Trust Receipts 1 325
C. Rights of Entruster
acts and contracts enumerated in the following article, the contracting par-
ties may compel each other to observe that form, once the contract has been
perfected. This right may be exercised simultaneously with the action upon
the contract
326 1 Credit Transactions: Notes and Cases
D. Obligations of Entrustee
E. Rights of Purchaser
A. General Concepts
B. Form of Guaranty
2 Civil Code, Art 1157. Obligations arise from: (1) Law; (2) Contracts; (3)
Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-
delicts.
3 Dino & Uy v. Court of Appeals & Metropolitan Bank & Trust Company,
G.R. No. 89775, November 26,1992,216 SCRA 9.
338 I Credit Transactions: Notes and Cases
C. Obligations Secured
D. Parties to a Guaranty
7 Dino & Uy v. Court of Appeals & Metropolitan Bank & Trust Company,
G.R. No. 89775, November 26,1992,216 SCRA 9.
Guaranty 341
1. The creditor,
3. The guarantor.
E. Benefit of Excussion
8
Escano &Silos v. Ortigas, Jr., G. R. No. 151953, June 29,2007,526 SCRA 26.
342 1 Credit Transactions: Notes and Cases
This is error.
F. Right to Protection
2. Demand security.
G. Right to Indemnification
13 Kuenzle & Streiff v. Tan Sunco, et al., G.R No. L-5208, December 1, 1909,
16 Phil 70.
358 1 Credit Transactions: Notes and Cases
Art. 2069. If the debt was for a period and the gu-
arantor paid it before it became due,
he cannot demand reimbursement of the debtor
until the expiration of the period
unless the payment has been ratified by the deb-
tor.
14 Escano & Silos v. Ortigas, Jr., G. R. No. 151953, June 29,2007,526 SCRA 26.
is Blacks Law Dictionary, Ninth Edition (2009).
16 Kuenzle & Streiff v. Tan Sunco, et al., G.R. No. L-5208, December 1, 1909,16
Phil 70.
360 1 Credit Transactions: Notes and Cases
H. Right to Subrogation
I. Rights of Co-Guarantors
1. Benefit of Division
2. Right to Reimbursement
19 Cacho v. Valles, et aL, C& No. L-1940 August27' 19m, 45 Phil 107.
364 1 Credit Transactions: Notes and Cases
A. General Concepts
B. Form of Surety
4 Government of the Philippines v. Tizon, et al., G.R. No. L-22108, August 30,
1967,20 SCRA 1182.
5 Garcia v. Court of Appeals & Lasal Development Corporation, G.R. No.
80201, November 20, 1990, 191 SCRA 493 citing Sykes v. Everett, 167 NC
600 and Miner's Merchants Bank v. Gidley, 150 WVa 229,144 SE 2d 711.
6 Civil Code, Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3)
Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-
delicts.
7 Civil Code, Art 1403.
Surety I369
hence, it is
unenforceable by action, unless the same, or
some note or memorandum, thereof, be in writ-
ing, and subscribed by the party charged, or by
his agent; evidence, therefore, of the agreement
cannot be received without the writing, or a sec-
ondary evidence of its contents. 8
C. Obligations Secured
8 Ibid.
9 Garcia v. Court of Appeals & Lasal Development Corporation, G.R. No.
80201, November 20, 1990, 191 SCRA 493.
10
La Insular v. Go-Tauco & Co-Siong, G.R. No. L-13307, February 3,1919,39
Phil 567, citing Miller v. Stewart, 9 Wheat 680, 6 L. ed. 189, cited in Dino &
Uy v. Court of Appeals & Metropolitan Bank & Trust Company, G.R. No.
89775, November 26, 1992, 216 SCRA 9.
370 1 Credit Transactions: Notes and Cases
The Facts
..."The antecedent material and relevant facts are
that defendant-appellant Sta. Ines Melale ('Sta. In-
es') is a corporation engaged in logging opera-
tions...
"On 10 November 1980, [Petitioner] Security Bank
and Trust Co. granted appellant Sta. Ines Melale
Corporation [SIMC] a credit line in the amount of
[e]ight [m]llion [p]esos (P-8,000,000.00) to assist the
latter in meeting the additional capitalization re-
quirements of its logging operations.
"The Credit Approval Memorandum expressly
372 1 Credit Transactions: Notes and Cases
Alleged Extension
Petitioner insists that the 1989 Loan Agreement
was a mere renewal or extension of the 128 million
original accommodation; it was not a novation...
14 Cochingyan
v. R & B Surety and Insurance Co., G.R. No. L-47369, June 30,
1987,151 SCRA 339.
Surety 1379
ContinuingSurety
Contending that the Indemnity Agreement was in
the nature of a continuing surety, petitioner main-
tains that there was no need for respondent to ex-
ecute another surety contract to secure the 1989
Loan Agreement.
The ruling in Escano is legal basis for saying that not all
the provisions of Section 4, Chapter 3, Title I, Book IV of
the Civil Code apply to suretyships. The Supreme Court
adopted the observation that a suretyship is not "With-
drawn from the applicable provisions governing guaran-
ty." The Supreme Court has applied the provisions of Ar-
ticle 1216 to suretyships but has also said that Article 1217
does not. What then are the other provisions on joint and
solidary obligations that do not apply to suretyships?
456 I Credit Transactions: Notes and Cases
A. General Concepts
1 Vda. De Bautista v. Marcos, et al., G.R. No. L-17072, October 31, 1961, 3
SCRA 434, and Congregacion de la Mision de San Vicente de Paul v. Reyes
& El Banco Espanol-Filipino, G.R. No. L-5508, August 14,1911,19 Phil 524.
2 Blacks Law Dictionary, Ninth Edition (2009).
Pledge and Mortgage I 459
B. Obligations Secured
3 Lagrosa v. Court of Appeals, et al., G.R. Nos. 115981-82, August 12, 1999,
312 SCRA 298, Samatra & Isidro v. Vda. de Parinas, G.R. No. 142958, April
24, 2002, 381 SCRA 522, Heirs of Manlapat v. Court of Appeals, et al., G.R
No. 125585, June 8, 2005, 459 SCRA 412. More accurately, the mortgagee
does acquire a property interest; or title, in the collateral, but only by way
of security.
4 Civil Code, Art 2052.
460 1 Credit Transactions: Notes and Cases
7 Danao, et al. v. Court of Appeals, G.R. No. L-48276, September 30, 1987,
154 SCRA 446, citing Manila Trading and Supply Co. v. Co Kim, et al., G.R.
No. L-47869, April 8, 1941, 71 Phil 448, and Movido v. Rehabilitation
Finance Corporation & Provincial Sheriff of Samar, G.R. No. L-11990, May
29,1959, 105 Phil 886.
8 Bachrach Motor Co., Inc. v. Icarangal & Oriental Commercial Co., Inc., G.R
No. L-45350, May 29, 1939, 68 Phil 287.
9 Bank of America, NT & SA v. American Realty Corporation & Court of
Appeals, G.R. No. 133876, December 29,1999,321 SCRA 659.
462 1 Credit Transactions: Notes and Cases
F. Pactum Commissorium
1. Elements
11 Philippine National Bank v. De los Reyes, et al., G.R. Nos. L-46898-99, No-
vember 28,1989, 179 SCRA 619.
12 Central Bank of the Philippines, et al. v. Court of Appeals & Tolentino, G.R.
No. L-45710, October 3, 1985,139 SCRA 46.
464 1 Credit Transactions: Notes and Cases
him, merely because the period for the payment of the ob-
ligation had lapsed. When an obligation secured by a
pledge or mortgage becomes due, the creditor is entitled
to foreclose, but he is not authorized to appropriate the
collateral in order to recover the amount due.
15 Tan Chun Tic v. West Coast Life Insurance Co. & Locsin, G.R. No. L-30882,
February 1,1930,54 Phil 361.
466 1 Credit Transactions: Notes and Cases
16 Ibid.
Pledge and Mortgage 1 467
G. Equitable Mortgage
A. General Concepts
B. Form of Pledge
C. Obligations Secured
D. Object of Pledge
4 Union Bank of the Philippines v. Juniat, et al., G.R. No. 171569, August 1,
2011,
http://sc.judiciary.gov.ph/jurisprudence/2011/august2Oll/171569.htm.
5 ACME Shoe, Rubber & Plastic Corporation v. Court of Appeals, G.R. No.
103576. August 22,1996, 260 SCRA 714.
6 See discussion under Real Estate Mortgage and Premiere Development
Bank v. Central Surety & Insurance Company, Inc. G.R. No. 176246, Febru-
ary 13, 2009, 579 SCRA 359, applying these concepts to pledge.
Pledge I 495
E. Ownership of Collateral
7 Civil Code, Art. 1634. When a credit or other incorporeal right in litigation
is sold, the debtor shall have a right to extinguish it by reimbursing the as-
signee for the price the latter paid therefor, the judicial costs incurred by
him, and the interest on the price from the day on which the same was
paid. A credit or other incorporeal right shall be considered in litigation
from the time the complaint concerning the same is answered. The debtor
may exercise his right within thirty days from the date the assignee de-
mands payment from him.
Pledige I1503
George Litton, Sr. involving the same litigated cre-
dit.
G. Right to Possession
1. Right of Retention
2. Right to Payment
11 Oriz v. Kayanan, et al, G.R. No. L-32974, July 30,1979,92 SCRA 146.
Pledge 1511
13 People's Bank & Trust Co. v. Odom, G.R. No. L-43670, February 25, 1937,
64 Phil 126.
520 1 Credit Transactions: Notes and Cases
H. Return of Collateral
I. Foreclosure of Pledge
14 Insular Life Assurance Company, Ltd., et al. v. Young, et al., G.R. No.
140964, January 16, 2002, 373 SCRA 626.
542 1 Credit Transactions: Notes and Cases
b. Right of Redemption
15 Manila Surety & Fidelity Company, Inc. v. Velayo, G.R. No. L-21069, Octo-
ber 26,1967, 21 SCRA 515.
16 Top Rate International Services, Inc. v. Intermediate Appellate Court, G.R.
Nos. L-67496, July 7,1986, 142 SCRA 467.
PledgI 543
J. Legal Pledges
19 Manila Surety & Fidelity Company, Inc. v. Velayo, G.R. No. L-21069, Octo-
ber 26,1967, 21 SCRA 515.
556 1 Credit Transactions: Notes and Cases
22 Optimum Motor Center Corporation v. Tan, G.R. No. 170202, July 14, 2008,
558 SCRA 267.
558 1 Credit Transactions: Notes and Cases