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CREDIT TRANSACTIONS include all transactions involving the purchase or loan of goods, services or money in the present with a promise to pay or deliver in the future (contract of security) 2 TYPES OF CREDIT TRANSACTIONS: 1. secured transactions those supported by a collateral or an encumbrance of property 2. unsecured transactions those supported only by a promise to pay or the personal commitment of another such as a guarantor or surety SECURITY is something given, deposited or serving as a means to ensure the fulfillment or enforcement of an obligation or of protecting some interest in the property 2 TYPES OF SECURITY: 1. personal when an individual becomes a surety or a guarantor 2. real or property when an emcumbrance is made on property BAILMENT is the delivery of property of one person to another in trust for a specific purpose, with a contract, express or implied, that the trust shall be faithfully executed and the property returned or duly accounted for when a special purpose is accomplished or kept until the bailor reclaims it. PARTIES IN BAILMENT 1. bailor the giver, the party who delivers possession/custody of the thing bailed 2. bailee the recipient, the party who receives the possession/custody of the thing delivered KINDS OF CONTRACTUAL BAILMENT W/ REFERENCE TO COMPENSATION 1. for the sole benefit of the bailor (gratuitous) e.g. gratuitous deposit, mandatum (do some act w/ respect to aQuickTime and a thing) TIFF (Uncompressed) decompressor are needed of this bailee (gratuitous) 2. for the sole benefit to seethepicture. e.g. commodatum, gratuitous simple loan or mutuum 3. for the benefit of both parties e.g. deposit for compensation, involuntary deposit, pledge and bailments for hire: a. hire of things temporary use b. hire of service for work or labor c. hire of carriage of goods for carriage d. hire of custody for storage
LOAN CHARACTERISTICS 1. real contract delivery is essential for perfection of the loan (BUT a promise to lend, being consensual, is binding upon the parties) 2. unilateral contract - only the borrower has the obligation KINDS 1. commodatum where the bailor delivers to the bailee a non-consumable thing so that the latter may use it for a certain time and return the identical thing kinds of commodatum: a. ordinary commodatum use by the bailee of the thing is for a certain period of time b. precarium one whereby the bailor may demand the thing loaned at will; exists in cases where: i. neither the duration of the contract nor the use to which the thing loaned should be devoted has been stipulated ii. if the use of the thing is merely tolerated by the owner 2. mutuum or simple loan - where the lender delivers to the borrower money or other consumable thing upon the condition that the latter will pay the same amount of the same kind and quality (when it is consumed in a manner appropriate to its purpose) LOAN 1. delivery by one party and the receipt by the other party of a given sum of money or other consumable thing upon an agreement, express or implied 2. to repay the same amount of the same kind and quality, w/ or w/o interest CREDIT The ability of an individual to borrow money or things by virtue of the confidence or trust reposed by a lender that he will pay what he may promise w/in a specified period
Adviser: Dean Cynthia Roxas-Del Castillo; Heads: Joy Marie Ponsaran, Eleanor Mateo; Understudies: Joy Stephanie Tajan, John Paul Lim; Subject Head: Sarah Lopez; Pledgee: Aiza Constantino
Thing to be returned
When to return
Nature
May involve real or personal property Loan for use or Loan for temporary consumption possession Bailor may Lender may not demand the demand its return return of the before the lapse of thing loaned the term agreed before the upon expiration of the term in case of urgent need Loss TIFF (Uncompressed) decompressor of QuickTime and a the Borrower suffers are needed to see ththe loss (even if subject matter is is picture. suffered by the caused exclusively bailor since he is by a fortuitous the owner event and he is not therefore discharged from his duty to pay) Purely personal Not purely personal
OBLIGATIONS OF THE BAILEE (Arts 1941-1945) (COOLRD2) 1. To pay for the ordinary expenses for the use and preservation of the thing loaned (Art. 1941) 2. To pay for all other expenses other than those referred to in Art. 1941 and 1949 (refund of extraordinary expenses either in full or in half) (Art. 1950) REASON: Bailee makes use of the thing. Expenses for ostentation are to borne by the
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OBLIGATIONS OF THE BAILOR (AD-READ-HA) 1. Primary obligation of the bailor: GR: To allow the bailee the use of the thing loaned for the duration of the period stipulated or until the accomplishment of the purpose for w/c the commodatum was constituted Exceptions: the bailor may demand the return or its temporary use upon: a. bailor has an urgent need for the thing (Art. 1946) the contract is suspended Reason: the right of the bailor is based on the fact that commodatum is essentially gratuitous b. bailee commits an act of ingratitude (Art. 1948) if the bailee should commit an offense against the person, the honor or the property of the bailor, or of the wife or children under his parental authority if the bailee imputes to the bailor any criminal offense, or any act involving moral turpitude, even though he should prove it, unless the crime or the act has been committed against the bailee himself, his wife, or children under his authority; and if the bailee unduly refuses the bailor support when the bailee is legally or morally bound to give support to the bailor Reason: the person who commits any of the acts of ingratitude makes himself unworthy of the trust reposed upon him by the bailor. 2. May demand the thing at will when the contract is precarium PRECARIUM a kind of commodatum where the bailor may demand the thing at will. It has been defined as a contract by which the owner of a thing, at the request of another person, gives the latter the thing for use as long as the owner shall please 3. To refund the extraordinary expenses (Art. 1949)
e. the bailee suffers damages by reason of the flaw or defect Exception: when the defect is not known to the bailor, he is not liable because commodatum is gratuitous. 8. The bailor has no right of abandonment for expenses and damages (Art. 1952) Reason: The expense and/or damages may exceed the value of the thing loaned
SIMPLE LOAN OR MUTUUM contract whereby one of the parties delivers to another money or other fungible thing w/ the understanding that the same amount of the same kind and quality shall be paid. (Art. 1933)
SIMPLE LOAN Signifies the delivery of money or some other consumable thing to another w/ a promise to repay an equivalent amount of the same kind and quality There is a transfer of ownership of the thing delivered
RENT/LEASE One party delivers to another some nonconsumable thing in order that the latter may use it during a certain period and return it to the former The owner of the lessee or the lessor of the property does not lose his ownership. He simply loses control over the property rented during the period of the contract The relation is between landlord and tenant The owner of the property receives compensation or price either in money, provisions, chattels, or labor from the occupant thereof in return for its use
COMMODATUM
The relation between parties is that of obligor and oblige The creditor receives payment for his loan
7. To pay damagesTIFF (Uncompressed) this picture. flaws (Art. for needed to see decompressor are known hidden 1951) Requisites: (the following must concur) a. there is a flaw or defect in the thing loaned b. the flaw or defect is hidden c. the bailor is aware thereof d. he does not advise the bailee of the same
Basis of comparison
MUTUUM
Subject matter
2. Interest accruing from unpaid interest - interest due shall earn interest from the time it is judicially demanded although the obligation may be silent upon this point. DETERMINATION OF INTEREST PAYABLE IN KIND: Its value shall be appraised at the current price of the products or goods at the time and place of payment. (Art. 1958) Purpose: to make usury harder to perpetrate COMPOUNDING INTEREST (Art. 1959) GR: accrued interest (interest due and unpaid) shall not earn interest Exceptions: When judicially demanded When there is an express stipulation made by the parties to wit: that the interest due and unpaid shall be added to the principal obligation and the resulting total amount shall earn interest Compounding interest may be availed of only when there is a written stipulation in the contract for the payment of interest.
Nature of contract
May be gratuitous
NATURE OF MUTUUM a. bilateral - borrower promise to pay is the consideration for the lenders obligation to furnish the loan b. no criminal liability upon failure to pay SUBJECT MATTER a. fungible or consumable-depending on the intent of the parties, that the return of the thing is equivalent only and not the identical thing b. money c. if the transfer of ownership is on a nonfungible thing, with the obligation of the other to give things of the same kind, quantity and quality, it is a barter INTEREST GR: Interest must be expressly stipulated in writing, and it must be lawful (Art. 1956) Exceptions: 1. Indemnity for damages the debtor in delay is liable to pay legal interest (6%/12%) as indemnity for damages even in the absence of a stipulation for the payment of interest. Interest as indemnity for damages is payable only in case of default or non-performance of contract. Basis for computation for indemnity: a. Central Bank Circular 416 12% p.a. in cases of: Loans QuickTime and a Forbearance of decompressor goods or TIFF (Uncompressed) money, are needed to see this picture. credits Judgments involving such loans or forbearance, in the absence of the express agreement as to such rate of interest During the interim period from the date judgment until actual payment b. Art. 2209 of the Civil Code 6% p.a. in cases of:
BARTER BARTER - A contract whereby one person transfers the ownership of non-fungible things to another with the obligation on the part of the latter to give things of the same kind, quantity and quality.
DEPOSIT DEPOSIT - A deposit is constituted from the moment a person receives a thing belong to another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the principal purpose of the contract, there is no deposit but some other contract. NOTE: it is essential that the depository is not the owner of the thing deposited
each of whom believes himself entitled to the thing deposited; b. necessary- made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns or by travelers with common carriers Judicial Will of the court Security or to ensure the right of a party to the property or to recover in case of favorable judgment Generally immovables Always onerous Extrajudicial Will of the contracting parties Custody and safekeeping
Deposit
Safekeeping or mere custody
Mutuum
Consumption
Commodatum
Transfer of the use
Creation Purpose
Principal Purpose
Deman dability
Object
Both movable and immovable may be the object But in extrajudicial deposit, only a movable (corporeal) thing may be the object May be gratuitous
Only money and any other fungible thing may be the object
or only after the expiration of the period or accomplishme nt of the use of the thing subject to exceptions Both movable and immovable may be the object
Movables only May be compensated but generally gratuitious Upon demand of depositor Depositor or /3rd person designated
Return thing
of
Upon order of the court/ end of litigation Person who has a right
Nature of contract
May be gratuitous
DEPOSIT IS GENERALLY GRATUITOUS: (Art. 1965) GR: A deposit is generally gratuitous. Exceptions: a. when there is a contrary stipulation b. where depositary is engaged in the business of storing goods c. where property is saved without knowledge of the owner SUBJECT MATTER OF DEPOSIT (Art. 1966) GR: only movable or personal property may be the object of deposit, whether voluntary or necessary. Exception: In judicial deposit, it may cover both movable and immovable property.
CREATION OF DEPOSIT (Art. 1964) 1. By virtue of a court order; or 2. By law QuickTime and a TIFF the parties mpressor deco 3. Not by the will of(Uncompressed) this picture. are needed to see 4. It is essential that the depositary is not the owner of the property deposited (Art. 1962) KINDS OF DEPOSIT 1. judicial - when an attachment or seizure of property in litigation is ordered 2. extrajudicial (Art. 1967) a. voluntary- delivery is made by the will of the depositor or by two or more persons
DEPOSITOR NEED NOT BE THE OWNER OF THE THING: GR: The depositor must be the owner of the thing deposited.
OBLIGATIONS OF THE DEPOSITARY (SRT-CCCULC-RITT-RPT-TL-HR) 1. Two primary obligations (Art. 1972) a. safekeeping of the object; b. Return of the thing when required even though a specified term or time for such may have been stipulated in the contract. Degree of Care same diligence as he would exercise over his property. Reasons: i. Essential requisite of judicial relation which involves the depositors confidence in his good faith and trustworthiness; ii. The presumption that the depositor took into account the diligence which the depositary is accustomed with respect to his own property. The depositary cannot excuse himself from liability in the event of loss by claiming that he exercised the same amount of care toward the thing deposited as he would towards his own if such care is less than that required by the circumstances. 2. Obligation not to transfer deposit (Art. 1973) GR: the depositary is not allowed to deposit the thing with a third person. Reason: A deposit is founded on trust and confidence and it can be supposed that the depositor, in choosing the depositary, has taken into consideration the latters qualification. Exception: The depositary is authorized by express stipulation. Liabilities: Depositary is liable for loss of the thing deposited when: a. He transfers the deposit with a third person without authority although there is no negligence on his part and the third person; b. He deposits the thing with a third person who is manifestly careless or unfit although authorized, even in the absence of negligence; or c. The thing is lost through the negligence of his employees whether the latter are manifestly careless or not. Exemption from liability: The thing is lost without the negligence of the third person with whom he was allowed to deposit the
c.
16. Obligation to return to the person to whom return must be made. (Art. 1986) a. The depositary is obliged to return the thing deposited, when required, to: The depositor; To his heirs or successors; or To the person who may have been designated in the contract. b. If the depositor was incapacitated at the time of making the deposit, the property must be returned to: His guardian or administrator; To the person who made the deposit; To the depositor himself should he acquire capacity. c. Even if the depositor had capacity at the time of making the deposit but he subsequently loses his capacity during the deposit, the thing must be returned to his legal representative. 17. Obligation to return at the place of return (Art. 1987) same as the general rule of law regarding the place of payment. (Art. 1251) GR: At the place agreed upon by the parties, transportation expenses shall be borne by the depositor. Exception: In the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made. 18. Obligation to return upon the time of return. (Art. 1988)
OBLIGATIONS OF THE DEPOSITOR (PLD) 1. Obligation to pay preservation. (Art. 1992) expenses of
2. Obligation to pay losses incurred due to character of thing deposited. (Art. 1993) GR: The depositary must be reimbursed for loss suffered by him because of the character of the thing deposited. Exceptions: a. Depositor was not aware of the danger; b. Depositor was not expected to know the dangerous character of the thing; c. Depositor notified the depositary of such dangerous character; d. Depositary was aware of the danger without advice from the depositor. 3. Effect of death of depositor or depositary. (Art. 1995) a. Deposit gratuitous death of either of the depositor or depositary extinguishes the deposit (personal in nature). By the word extinguished, the law really means that the depositary is not obliged to continue with the contract of deposit. b. Deposit for compensation not extinguished by the death of either party. Other Matters Concerning a Depositor 1. Depositary has a right to retain the thing in pledge until full payment of what may be due him by reason of the deposit 2. A deposit is extinguished: a. upon the loss or deterioration of the thing deposited;
SEQUESTRATION OR JUDICIAL DEPOSIT When judicial deposit takes place: Judicial deposit takes place when an attachment or seizure of property in litigation is ordered by a court. (Art. 2005) Nature: Auxiliary to a case pending in court.
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Purpose
Subject Matter
Remuneration
Security; Secure the right of a party to recover in case of favorable judgment. Either movable or immovable property but generally, immovable Always remunerated (onerous) In behalf of the person who, by the judgment, has a right
Generally gratuitous, but may be compensated In behalf of the depositor or third person designated
TIFF (Uncompressed) decompressor WAREHOUSE needed to see this picture. RECEIPTS LAW are
QuickTime and a
Scope:
Application: applies to warehouse receipts issued by a warehouseman as defined in Sec. 58(a), while the Civil Code, to other cases where receipts are not issued by a warehouseman.
PERSONS TO WHOM THE GOODS MUST BE DELIVERED 1. Persons lawfully entitled to the possession of the goods or its agent 2. Persons entitled to deliver under: a. a non-negotiable receipt; or b. with written authority 3. person in possession of a negotiable receipt (which was lawfully negotiated)
1. Failure to stamp duplicate on copies of a negotiable receipt (Sec. 6 and 15) When more than one negotiable receipts are issued for the same goods, the word duplicate must be plainly placed by the warehouseman upon the face of every such receipt except the 1st. In such case, the warehouseman warrants: a. that the duplicate is an accurate copy of the original receipt b. such original receipt is uncancelled at the date of the issue of the duplicate NOTE: The duplicate imposes no other liability upon the warehouseman. 2. Failure to place non-negotiable on a nonnegotiable receipt (Sec. 7) 3. Misdelivery of the goods (Sec. 10) To one not lawfully entitled to possession: Liable for conversion (unauthorized assumption and exercise of the right of ownership over goods belonging to another through alteration or the exclusion of the owners right) To a person entitled to delivery under a nonnegotiable receipt or written authorization OR person in possession of a negotiable receipt Still liable for conversion if: a. prior to delivery, he had been requested NOT to make such delivery b. he had received notice of the adverse claim or title of a 3rd person 4. Failure to effect cancellation of a negotiable receipt upon delivery of the goods (Sec. 11) This is applicable ONLY to negotiable receipts but NOT to a situation whereand a QuickTime there was a valid TIFF (Uncompressed) decompressor are needed to Sec. 36 sale in accordance with see this picture. a. When the goods are delivered already: Failure to cancel will make him liable to any one who purchased for value in good faith such receipt b. When only some of the goods were delivered: Failure to cancel or to state plainly in the receipt that some goods were delivered will make him liable to
WITH REGARD TO OWNERSHIP 1. Ownership is not a defense for refusal to deliver The warehouseman cannot refuse to deliver the goods on the ground that he has acquired title or right to the possession of it unless such is derived: a. directly or indirectly from a transfer made by the depositor at the time of the deposit for storage or subsequent thereto; b. from the warehousemans lien 2. Adverse title of a 3rd person is not a defense for refusal to deliver by a warehouseman to his bailor on demand EXCEPT: a. To persons to whom the goods must be livered (Sec. 9) b. To the person who wins in the interpleader case (Sec. 17) c. To the person he finds to be entitled to the possession after investigation (Sec. 18) d. To the buyer in case there was a valid sale of the goods (Sec. 36)
DUTY OF WAREHOUSEMAN WHEN THERE ARE SEVERAL CLAIMANTS The warehouseman may either: 1. Investigate and determine within a reasonable time the validity of the claims, and deliver to the person whom he finds is entitled to the possession of the goods Effect: He is NOT excused from liability in case he makes a mistake 2. He may bring a complaint in interpleader Effect: a. he will be relieved and a from liability in QuickTime delivering theTIFF (Uncompressed) this person whom the goods tosee decompressor are needed to the picture. court finds to have better right; b. he is liable for refusal to deliver to the rightful claimant when it is required to have an interpleader; 3. He may not do (a) and (b) Effect: He will be liable after a lapse of a reasonable time, of conversion as of the date of the original demand for the goods.
REMEDIES FOR A WAREHOUSEMAN 1. Even if without lien, all remedies allowed by law to a creditor against his debtor for collection of charges; 2. By refusing to deliver the goods until his lien is satisfied; 3. All remedies allowed by law for the enforcement of a lien against personal property and recovery of any deficiency in case it exists after the sale of the property; 4. By causing the extrajudicial sale of the property and applying the proceeds to the value of the lien PROCESS OF EXTRAJUDICIAL SALE: 1. Written notice to the person on whose account the goods are held or to persons who claim an interest in the goods containing: a. itemized statement of warehousemans lien showing the sum due and when it became due b. brief description of the goods c. a demand that a claim be paid on or before a day mentioned, not less than 10 days from: 1. delivery of notice if personally delivered 2. time when notice should reach its destination if sent by mail d. statement that if the claim is not paid, the goods will be advertised for sale and then sold at a specified time and place 2. After the time for payment of the claim if the notice has elapsed, the sale will be advertised stating: a. a description of the goods to be sold b. the name of the owner or person on whose account the goods were held c. time and place of the sale 3. Publication: a. if there is a newspaper published in the place of sale: once a week for 2 consecutive weeks and the sale not held less than 15 days from the time of the 1st publication b. if there is no newspaper: posted at least 10 days before the sale in not less than 6 conspicuous places in the place of sale 4. Sale itself in: a. place where the lien was acquired b. if such place is manifestly unsuitable for the purpose, at the nearest suitable place
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CHARACTERISTICS OF THE CONTRACT 1. Accessory dependent for its existence upon the principal obligation guaranteed by it; 2. Subsidiary and conditional takes effect only when the principal debtor fails in his obligation subject to limitation 3. Unilateral a. It gives rise only to a duty on the part of the guarantor in relation to the creditor and not vice versa b. It may be entered into even without the intervention of the principal debtor. 4. Guarantor must be a person distinct from the debtor a person cannot be the personal guarantor of himself CLASSIFICATION OF GUARANTY 1. Guaranty in the broad sense: a. Personal guaranty is the credit given by the person who guarantees the fulfillment of the principal obligation; or b. Real guaranty is property, movable, or immovable i. Real mortgage (2124) or antichresis (2132) guaranty is immovable ii. Chattel mortgage (2140) or pledge (2093) guaranty is movable 2. As to its origin: a. Conventional constituted by agreement of the parties (2051[1]) b. Legal imposed by virtue of a provision of law c. Judicial required by a court to guarantee the eventual right of one of the parties in a case. 3. As to consideration: a. Gratuitous guarantor does not receive any price or remuneration for acting as such (2048) b. Onerous one where the guarantor receives valuable consideration for his guaranty 4. As to person guaranteed:
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NECESSITY OF VALID PRINCIPAL OBLIGATION (2052[1]) Guaranty is an accessory contract: It is an indispensable condition for its existence that there must be a principal obligation. Hence, if the principal obligation is void, it is also void.
GUARANTY OF FUTURE DEBTS (2053) Continuing Guaranty or Suretyship: 1. Not limited to a single transaction but which contemplates a future course of dealings, covering a series of transactions generally for an indefinite time or until revoked. 2. It is prospective in its operation and is generally intended to provide security with respect to future transactions. 3. Future debts, even if the amount is not yet known, may be guaranteed but there can be no claim against the guarantor until the amount of the debt is ascertained or fixed and demandable. Reason: A contract of guaranty is subsidiary. a. To secure the payment of a loan at maturity surety binds himself to guarantee the punctual payment of a loan at maturity and all other obligations of indebtedness which may become due or owing to the principal by the borrower. b. To secure payment if any debt to be subsequently incurred a guaranty shall be construed as continuing when by the terms therof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. c. To secure existing unliquidated debts refer to debts existing at the time of the constitution of the guaranty but the amount thereof is unknown and not to dents not yet incurred and existing at that time. The surety agreement itself is valid QuickTime and a and binding(Uncompressed) decompressor even before the principal TIFF are needed to see this picture. obligation intended to be secured thereby is born, any more than there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent GUARANTY OF CONDITIONAL OBLIGATIONS: A guaranty may secure all kinds of obligations, be they
EXCEED
GR: Guaranty is a subsidiary and accessory contract guarantor cannot bind himself for more than the principal debtor and even if he does, his liability shall be reduced to the limits of that of the debtor. But the guarantor may bind himself for less than that of the principal. Exceptions: 1. Interest, judicial costs, and attorneys fees as part of damages may be recovered creditors suing on a suretyship bond may recover from the surety as part of their damages, interest at the legal rate, judicial costs, and attorneys fees when appropriate, even without stipulation and even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. Reason: Surety is made to pay, not by reason of the contract, but by reason of his failure to pay when demanded and for having compelled the creditor to resort to the courts to obtain payment. Interest runs from: a. Filing of the complaint (upon judicial demand); or b. The time demand was made upon the surety until the principal obligation is fully paid (upon extrajudicial demand) 2. Penalty may be provided a surety may be held liable for the penalty provided for in a bond for violation of the condition therein. Principals liability guarantors obligations may exceed
The amount specified in a surety bond as the suretys obligation does not limit the extent of the damages that may be recovered from the
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GUARANTY NOT PRESUMED (2055) Guaranty requires the expression of consent on the part of the guarantor to be bound. It cannot be presumed because of the existence of a contract or principal obligation. Reasons: 1. There be assurance that the guarantor had the true intention to bind himself; 2. To make certain that on making it, the guarantor proceeded with consciousness of what he was doing. GUARANTY COVERED BY THE STATUTE OF FRAUDS Guaranty must not only be expressed but must so be reduced into writing. Hence, it shall be unenforceable by action, unless the same or some note or memorandum thereof be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary evidence of its contents. It need not appear in a public document. GUARANTY STRICTLY CONSTRUED Strictly construed against the creditor in favor of the guarantor and is not be extended beyond its terms or specified limits. If there is any doubt on the terms and conditions of the guaranty or surety agreements, the doubt should be resolved in favor of the guarantor or surety. 1. Liability for obligation stipulated guarantor is liable only for the obligation of the debtor stipulated upon, and not to obligations assumed previous to the QuickTime and a TIFF guarantydecompressor execution of the(Uncompressed) this picture. an intent to unless are needed to see be so liable is clearly indicated. 2. Liability of surety limited to a fixed period the surety must only be bound in the manner and to the extent, and under the circumstances which are set forth or which may be inferred from the contract of guaranty or suretyship, and no farther. 3. Liability of surety to expire on maturity of principal obligation such stipulation is
GUARANTY DISTINGUISHED FROM WARRANTY GUARANTY Contract by which a person is bound to another for the fulfillment of a promise or engagement of a third party WARRANTY An undertaking that the title, quality, or quantity of the subject matter of a contract is what it has been represented to be, and relates to some agreement made ordinarily by the party who makes the warranty
GUARANTY DISTINGUISHED FROM SURETYSHIP GUARANTY Liability depends upon an independent agreement to pay the obligation if the primary debtor fails to do so Engagement is a collateral undertaking Secondarily liable he contracts to pay if, by the use of due diligence, the dent cannot be paid SURETYSHIP Assumes liability as a regular party to the undertaking
Charged as an original promisor Primarily liable undertakes directly for the payment without reference to the solvency of the principal, and is so responsible at once the latter makes default, without any demand by the creditor upon the principal whatsoever or any notice of default Undertakes to pay if the principal does not pay, without regard to his ability to do so Insurer of the debt
Only binds himself to pay if the principal cannot or unable to pay Insurer of the solvency
OF
QUALIFICATIONS OF GUARANTOR (2056-2057) 1. He possesses integrity; 2. He has capacity to bind himself; 3. He has sufficient property to answer for the obligation which he guarantees. Exception: The creditor waives the requirements
Effect of Subsequent Loss of Required Qualifications: The qualifications need only be present at the time of the perfection of the contract. The subsequent loss of integrity or property or supervening incapacity of the guarantor would not operate to exonerate the guarantor of the eventual liability he has contracted, and the contract of guaranty continues. Remedy of creditor: Demand another guarantor with the proper qualifications Exception: Creditor may waive it if he chooses and hold the guarantor to his bargain. Article 2057: 1. Requires conviction in the first instance of a crime involving dishonesty to have the right to demand another. 2. Judicial declaration of insolvency is not necessary in order for the creditor to have a right to demand another guarantor. SELECTION OF GUARANTOR:
QuickTime and 1. Specified person stipulateda as guarantor: TIFF (Uncompressed) decompressor are needed to see this picture. Substitution of guarantor may not be demanded Reason: The selection of the guarantor is:
a. Term of the agreement; b. As a party, the creditor is, therefore, bound thereby. 2. Guarantor selected by the principal debtor: Debtor answers for the integrity, capacity, and solvency of the guarantor.
DUTY OF THE CREDITOR TO RESORT TO ALL LEGAL REMEDIES (2061) 1. After the guarantor has fulfilled the conditions required for making use of the benefit of exhaustion, it becomes the duty of the creditor to: 2. Exhaust all the property of the debtor pointed out by the guarantor; 3. If he fails to do so, he shall suffer the loss but only to the extent of the value of the said property, for the insolvency of the debtor. JOINDER OF GUARANTOR AND PRINCIPAL AS PARTIES DEFENDANT GR: The guarantor, not being a joint contractor with his principal, cannot be sued with his principal. Exception: Where it would serve merely to delay the ultimate accounting of the guarantor or if no different result would be attained if the plaintiff were forced to institute separate actions against the principal and the guarantors.
2.
PROCEDURE WHEN CREDITOR SUES (2062) 1. Sent against the principal as a rule, the creditor may hold the guarantor only after judgment has been obtained against the principal debtor and the latter is unable to pay. 2. Notice to guarantor of the action guarantor must be notified so that he may appear, if he so desires, and set up defenses he may want to offer a. Guaranty appears voluntary appearance does not constitute a renunciation of his right to excussion. b. Guaranty does not appear
3. 4. 5.
DUTY OF CREDITOR TO MAKE PRIOR DEMAND FOR PAYMENT FROM GUARANTOR (2060) 1. When demand to be made only after judgment on the debt for obviously the
BENEFIT OF EXCUSSION AMONG SEVERAL GUARANTORS: In order that the guarantor may be entitled to the benefit of division, it is not required that he point out the property of his co-guarantors. Reason: Obligation of the guarantor with respect to his co-guarantors is not subsidiary but direct and does not depend as to its origin on the solvency or insolvency of the latter.
GUARANTORS RIGHT TO SUBROGATION (2067) SUBROGATION transfers to the person subrogated, the credit with all the rights thereto appertaining either against the debtor or against third persons, be they guarantors or possessors of mortgages, subject to stipulation in conventional subrogation. 1. Accrual, basis, and nature of right right of subrogation is necessary to enable the guarantor to enforce the indemnity given in Art. 2066 a. Arises by operation of law upon payment by the guarantor b. It is not a contractual right c. The guarantor is subrogated, by virtue of the payment, to the right of the creditor, not those of the debtor. 2. When right not available since subrogation is the means of effectuating the right of the guarantor to be reimbursed. It cannot therefore be invoked in those cases where the guarantor has no right to be reimbursed. EFFECT OF PAYMENT BY GUARANTOR WITHOUT NOTICE TO DEBTOR (2068) If the debtor has already paid the creditor, when the guarantor pays, the debtor can set up against the guarantor the defense of previous extinguishments of the obligation by payment. Hence, guarantor must notify the debtor before making payment.
BENEFIT OF DIVISION AMONG SEVERAL GUARANTORS (2065) 1. In whose favor applicable a. Several guarantors; b. Only one debtor; c. For the same debt Cannot be availed of if there are:
are needed to see this picture. b. Two or more debtors of one debt, even if they be bound solidarily, each with different guarantors; or c. Two or more guarantors of the same debtor but not only for the same debt d. If any of the circumstances enumerated in Art. 2059 should take place, as would the benefit of exhaustion of the debtors property. QuickTime and a TIFF (Uncompressed) decompressor
EFFECT OF PAYMENT BY GUARANTOR BEFORE MATURITY (2069) Debtors obligation with a period demandable only when the day fixed comes. 1. The guarantor who pays before maturity is not entitled to reimbursement since there is no necessity for accelerating payment. 2. A contract of guaranty being subsidiary in character, the guarantor is not liable for the debt before it becomes due. Exception: The debtor will be liable if the payment was made: a. With his consent; or b. Subsequently ratified by him (ratification may be express or implied) RIGHT OF GUARANTOR TO PROCEED AGAINST DEBTOR BEFORE PAYMENT (2071) GR: Guarantor has no cause of action against the debtor until after the former has paid the obligation. Exceptions: 2071 enumerates instances when the guarantor may proceed against the debtor even before the payment. 1. When he is sued for the payment; 2. In case of insolvency of the principal debtor; 3. When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; 4. When the debt has become demandable, by reason of the expiration of the period for payment; 5. After the lapse of 10 years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than 10 years; 6. If there are reasonable grounds to fear that QuickTime the principal debtor intends and aabscond; to TIFF (Uncompressed) decompressor are needed to see this picture. 7. If the principal debtor is in imminent danger of becoming insolvent. Purpose: To enable the guarantor to take measures for the protection of his interest in view of the probability that he would be called upon to pay the debt.
SUIT BY GUARANTOR AGAINST CREDITOR BEFORE PAYMENT The guarantys or suretys action for release can only be exercised against the principal debtor and not against the creditor. Reason: Release of the guarantor imports an extinction in the obligation to the creditor; it connotes therefore, either a remission or novation by subrogation, and either operation requires the creditors assent for its validity.
2066 AND 2071 DISTINGUISHED 2066 (Right of Guarantor to Reimbursement after Payment) Provides for the enforcement of the rights of the guarantor against the debtor after he has paid the debt gives a right of action after payment Substantive right Gives a right of action, which, without the provisions of the other might be worthless 2071 (Right of Guarantor to Proceed against Debtor even before payment) Provides for the protection before he has paid but after he has become liable gives a protective remedy before payment Preliminary remedy Remedy given seeks to obtain from the guarantor release from the guaranty or to demand a security that shall protect him from any proceedings by the creditor and from the danger of insolvency of the debtor.
GUARANTOR OF A THIRD PERSON AT REQUEST OF ANOTHER (2072) The guarantor who guarantees the debt of an absentee at the request of another has a right to claim reimbursement, after satisfying the debt from: 1. The person who requested him to be a guarantor; 2. The debtor BETWEEN CO-GUARANTORS RIGHT TO CONTRIBUTION OF GUARANTOR WHO PAYS (2073) Presumption of joint liability guarantors when there are: 1. 2. 3. Effect: share. of several
1. 2. 3. 4.
Two or more guarantors; and a QuickTime decompressor Same debtor;TIFF (Uncompressed) this picture. are needed to see Same debt Each is bound to pay only his proportionate
When Art. 2073 Applicable: 1. When one guarantor has paid the debt to the creditor; 2. Payment by such guarantor must have been made:
RELEASE OF GUARANTOR WITHOUT CONSENT OF OTHERS (2078) Effect: The release benefits all to the extent of the share of the guarantor released. Reason: A release made by the creditor in favor of QuickTime and a one of the guarantors (Uncompressed)the consent of the TIFF without decompressor are needed to see this picture. others may prejudice the others should a guarantor become insolvent.
RELEASE WHEN GUARANTOR CANNOT BE SUBROGATED (2080) If there can be no subrogation because of the fault of the creditor, the guarantors are thereby released, even if the guarantors are solidary. Reason: The act of one cannot prejudice another. It also avoids collusion between the creditor and the debtor or a third person. DEFENSES AVAILABLE AGAINST CREDITOR (2081) TO GUARANTOR
RELEASE BY EXTENSION OF TERM GRANTED BY CREDITOR TO DEBTOR (2079) Release Without Consent of Guarantor: Creditor grants an extension of time to the debtor without the consent of the guarantor.
GR: All defenses, which pertain to the principal debtor and are inherent in the debt.
LEGAL AND JUDICIAL BONDS MEANING AND FORM OF BOND (2082) BOND an undertaking that is sufficiently secured, and not cash or currency. Bondsman a surety offered in virtue of a provision of law or a judicial order. Qualifications of personal bondsman: 1. He possesses integrity; 2. He has capacity to bind himself; 3. He has sufficient property to answer for the obligation which he guarantees. PLEDGE OR MORTGAGE IN LIEU OF BOND (2083) Guaranty or suretyship is a personal security. Pledge or mortgage is a property or real security. If the person required to give a legal or judicial bond should not be able to do so, a pledge or mortgage sufficient to cover the obligation shall be admitted in lieu thereof. BONDSMAN NOT ENTITLED TO EXCUSSION (2084) A judicial bondsman and the sub-surety are not entitled to the benefit of excussion. Reason: They are not mere guarantors, but sureties whose liability is primary and solidary. Effect of negligence of creditor: Mere negligence on the part of the creditor in collecting from the debtor will not relieve the surety from liability.
SURETYSHIP a relation which exists where one person (principal) has undertaken an obligation and another person (surety) is also under a direct and primary obligation or other duty to the aobligee, who is QuickTime and TIFF (Uncompressed) decompressor entitled to but one performance, and as between the are needed to see this picture. two who are bound, the second, rather than the first should perform. If a person binds himself solidarily with the principal debtor, the contract is called suretyship and the guarantor is called a surety. NATURE OF SURETYS UNDERTAKING
STRICTISSIMI JURIS RULE APPLICABLE ONLY TO ACCOMMODATION SURETY Reason: An accommodation surety acts without motive of pecuniary gain and hence, should be protected against unjust pecuniary impoverishment by imposing on the principal, duties akin to those of a fiduciary.
5. 6.
STRICTISSIMI JURIS RULE NOT APPLICABLE TO COMPENSATED SURETIES Reasons: 1. Compensated corporate sureties are business association organized for the purpose of assuming classified risks in large numbers, for profit and on an impersonal basis. 2. They are secured from all possible loss by adequate counter-bonds or indemnity agreements. 3. Such corporations are in fact insurers and in determining their rights and liabilities, the rules peculiar to suretyship do not apply.
7. 8.
PLEDGE Constituted on movables Property is delivered to the pledgee, or by common consent to a 3rd person Not valid against 3rd persons unless a description of the thing pledged and the date of the pledge appear in a public instrument
PROVISIONS COMMON TO PLEDGE AND MORTGAGE (Art 2085-2123) ESSENTIAL REQUISITES TO CONTRACTS OF PLEDGE AND MORTGAGE: 1. constituted to secure the fulfillment of a principal obligation 2. pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged 3. 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 4. cannot exist without a valid obligation 5. debtor retains the ownership of the thing given as a security 6. when the principal obligation becomes due, the thing in which the pledge or mortgage consists may be alienated for the payment to the creditor. IMPORTANT POINTS 1. future property cannot be pledged or QuickTime and a mortgaged TIFF (Uncompressed) decompressor are needed to see thisby one who is not 2. pledge/mortgage executed picture. the owner of the property pledged or mortgaged is without legal existence and registration cannot validate it. 3. mortgage of a conjugal property by one of the spouses is valid only as to of the entire property 4. in case of property covered by Torrens title, a mortgagee has the right to rely upon what
RIGHT OF CREDITOR WHERE DEBTOR FAILS TO COMPLY WITH HIS OBLIGATION 1. creditor is merely entitled to move for the sale of the thing pledged or mortgaged with the formalities required by law in order to collect 2. creditor cannot appropriate to himself the thing nor can he dispose of the same as owner. PROHIBITION AGAINST PACTUM COMMISSORIUM 1. stipulation is null and void - stipulation where thing or mortgaged shall automatically become the property of the creditor in the event of nonpayment of the debt within the term fixed 2. Requisites of pactum commissorium: a. there should be a pledge or mortgage b. there should be a stipulation for an automatic appropriation by the creditor of the property in the event of nonpayment 3. Effect on Security Contract -nullity of the stipulation does not affect validity and efficacy of the principal contract
3. unilateral- creates obligation solely on the part of the creditor to return the thing subject upon the fulfillment of the principal obligation 4. subsidiary- obligation incurred does not arise until the fulfillment of the principal obligation CAUSE OR CONSIDERATION IN PLEDGE 1. principal obligation in so far as the pledgor is concerned 2. compensation stipulated for the pledge or mere liberality of the pledgor- if pledgor is not the debtor PROVISIONS APPLICABLE ONLY TO PLEDGE 1. transfer of possession to the creditor or to third person by common agreement is essential in pledge - ACTUAL DELIVERY is important - CONSTRUCTIVE delivery or symbolic delivery of the key to the warehouse is sufficient to show that the depositary appointed by common consent of the parties was legally placed in possession. 2. all movables within commerce of men may be pledged as long as susceptible of possession 3. incorporeal right may be pledged. The instruments pledged shall be delivered to the creditor and if negotiable, must be indorsed. 4. pledge shall take effect against 3rd persons only if the ff appears in a public instrument: a. description of the thing pledged b. date of the pledge 5. thing pledged may be alienated by the pledgor or owner only if with the consent of the pledgee. Ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation, butt he latter shall continue in possession 6. contract of pledge gives right to the creditor to retain the thing in his possession or in that of a third person to whim it has been delivered, until the debt is paid 7. creditor : a. shall take care of the thing pledged with the diligence of a good father of a family b. has the right to the reimbursement of the expenses made for its preservation is liable for its loss or deterioration by reason of fraud, negligence, delay or violation of the
KINDS OF PLEDGE: are needed to see this picture. 1. Voluntary or conventional- created by agreement of the parties 2. Legal- created by operation of law CHARACTERISTICS OF PLEDGE: 1. real- perfected by delivery 2. accessory- has no independent existence of its own
Period to redeem start from date of registration of certificate of sale Special power of attorney in favor of mortgagee is needed in the contract
Antichresis Property is delivered to creditor Creditor acquires only the right to receive the fruits of the property, hence, it does not produce a real right
Real Mortgage Debtor usually retains possession of the property Creditor does not have any right to receive the fruits, but the mortgage creates a real right over the property
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OBLIGATIONS OF ANTICHRETIC CREDITOR (FAT-P) 1. to pay taxes and charges on the estate, including necessary expenses NOTE: Creditor may avoid said obligation by: a. compelling debtor to reacquire enjoyment of the property b. by stipulation to the contrary 2. to apply all the fruits, after receiving them, to the payment of interest, if owing, and thereafter to the principal 3. to render an account of the fruits to the debtor 4. to bear the expenses necessary for its preservation and repair REMEDIES OF CREDITOR IN CASE OF NONPAYMENT OF DEBT 1. action for specific performance 2. petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the Rules of Court NOTES: the parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts QuickTime and of mortgage and pledgea (Tavera v. El TIFF (Uncompressed) decompressor are needed to see this picture. Hogar Filipino, Inc. 68 Phil 712) a stipulation authorizing the antichretic creditor to appropriate the property upon the non-payment of the debt within the agreed period is void (Art. 2088) CHATTEL MORTGAGE (Arts. 2140-2141)
Creditor is entitled to deficiency from the debtor EXCEPT if it is a security for the purchase of personal property in installments
LAWS GOVERNING CHATTEL MORTGAGE 1. Chattel Mortgage Law, Act No. 1508, as amended 2. Civil Code 3. Revised Administrative Code 4. Revised Penal Code 5. Ship Mortgage Decree of 1978 (PD 1521) governs mortgage of vessels of domestic ownership AFFIDAVIT OF GOOD FAITH - An oath in a contract of chattel mortgage wherein the parties "severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purposes and that the same is a just and valid obligation and one not entered into for the purpose of fraud. EFFECT OF REGISTRATION 1. creates real rights 2. adds nothing to mortgage Note: Registration of assignment of mortgage is not required
CONCURRENCE OF CREDIT: It implies possession by two or more creditors of equal right or privileges over the same property or all of the property of a debtor. PREFERENCE OF CREDIT: It is the right held by a creditor to be preferred in the payment of his claim above other out of the debtors assets. GENERAL PROVISIONS: 1. the debtor is liable with all his property, present and future, for the fulfillment of his obligations, subjects to exemptions provided by law - exempt property: a. present property 1. family home (Arts 152, 153 and 155, NCC) 2. right to receive support as well as money or property obtained by such support shall not be levied upon on attachment or execution (Art 205, NCC) 3. Sec 13, Rule 39, Rules of Court 4. Sec 118, the public Land Act,( CA No. 141, as amended) b. future property a debtor who obtains a discharge from his debts on account of insolvency, is not liable for the unsatisfied claims of his creditors with said property (Secs. 68 and 69, Insolvency Law, Act No. 1956) c. property in custodia legis and of public dominion
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by
RIGHT OF MORTGAGEE TO RECOVER QuickTime and a TIFF (Uncompressed) decompressor DEFICIENCY are needed to see this picture. 1. where mortgage foreclosed: creditor may maintain action for deficiency although Chattel Mortgage Law is silent on this point. Reason is chattel mortgage is only given as a security and not as payment of the debt. 2. where mortgage constituted as security for purchase of personal property payable in installments: no deficiency judgment can
INSOLVENCY vs. BANKRUPTCY The only distinction between insolvency and bankruptcy is a matter of terminology and the source of the laws relating thereto. Either a bankruptcy or insolvency statute may operate to discharge a debt as well as release the debtor from imprisonment, and either may operate on the petition of the debtor or that of his creditors. INSOLVENCY PRIMARILY GOVERNED BY THE CC Insolvency shall be governed by special laws insofar as they are not inconsistent with the CC. Insolvency is thus primarily governed by the CC and subsidiarily by the Insolvency Law. The Insolvency Law is intended to cover the entire subject of insolvency and bankruptcy and must be treated as a complete body of law upon the subject. PURPOSES OF INSOLVENCY LAW: 1. To effect an equitable distribution of the bankrupts property among his creditors; and 2. To benefit the debtor in discharging him from his liabilities and enabling him to start afresh with the property set apart to him as exempt. 3. The regulatory and unifying influence of the law on credit transactions and business usage throughout the country.
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WHAT MAY BE PERMITTED OF A DEBTOR BY THE INSOLVENCY LAW 1. Petition the court to suspend payments; 2. To be discharged from his debts and liabilities by voluntary or involuntary insolvency proceedings.
SUSPENSION OF PAYMENTS postponement, by court order, of the payment of debts of one who, while possessing sufficient property to cover his debts, foresees the impossibility of meeting them when they respectively fall due. PURPOSE: To suspend or delay the payment of debts the amount of which is not affected although a postponement is declared. BASIS: Probability of the debtors inability to meet his obligations when they respectively fall due, despite the fact that he has sufficient assets to cover all his liabilities. REQUISITES OF PETITION FOR SUSPENSION OF PAYMENTS: 1. Petition is filed by a debtor; 2. Possessing sufficient property to cover all his debts; 3. Foreseeing the impossibility of meeting them when they respectively fall due; and 4. Petitioning that he be declared in the state of suspension of payments RULE ON DOUBLE MAJORITY IN THE MEETING OF CREDITORS Majority shall be: 1. Two thirds (2/3) of the creditors voting upon the same proposition, which QuickTime and a TIFF (Uncompressed) decompressor 2. Represents at are neededthree fifths (3/5) of the least to see this picture. total liabilities of the debtor. KINDS OF INSOLVENCY: VOLUNTARY INSOLVENCY an insolvent debtor owing debts exceeding the amount of P1,000.00 may apply to be discharged from his debts and liabilities by petition to the RTC of the province or city in which he has resided for six months next preceding the filing of the petition.
Number creditors
of
Acts of insolvency
Amount debt
of
Debtor must not be guilty of any of the acts of insolvency (Sec. 20) The amount of indebtedness must exceed P1,000.00 Bond is required not
Posting bond
of
Ex parte adjudication
An order of adjudication may be granted ex parte Petition is filed in the RTC of the province or city where the debtor has resided for six months Court issues the order of adjudication declaring the petitioner insolvent upon the filing of the voluntary petition
The debtor is not adjudicated insolvent until after hearing of the case
*SERVICEWIDE v. CA (320 SCRA 478 [1999]) ASSIGNMENT OF CREDIT/CONSENT: As provided in Article 2096 in relation to Article 2141 of the Civil Code, a thing pledged may be alienated by the pledgor or owner with the consent of the pledgee. This provision is in accordance with Act No. 1508 which provides that a mortgagor of personal property shall not sell or pledge such property, or any part thereof, mortgaged by him without the consent of the mortgagee in writing on the back of the mortgage and on the margin of the record thereof in the office where such mortgage is recorded. A mortgage credit may be alienated or assigned to a third person. Since the assignee of the credit steps into the shoes of the creditor-mortgagee
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QuickTime ASSIGNEE person elected by and a creditors or the TIFF (Uncompressed) decompressor are needed to see this picture. appointed by he court to whom an insolvent debtor makes an assignment of all his property for the benefit of his creditors.
CREDITORS NOT ENTITLED TO VOTE IN THE ELECTION OF ASSIGNEE 1. Those who did not file their claims at least two days prior to the time appointed for such election
4.
5.
6.
7. 8.
of every sheriff all the property and money in his possession belonging to the debtor. To sell, upon order of the court, any estate of the debtor which has come into his possession; To redeem all mortgages and pledges and to satisfy any judgment which may be an encumbrance on any property sold by him. To settle all accounts between the debtor and his debtors subject to the approval of the court; To compound, under the order of the court, with any person indebted to such debtor; To recover any property fraudulently conveyed by the debtor.
CREDITORS LIABILITY FOR FRAUDULENTLY ASSIGNING HIS CREDIT A creditors transfer or assignment of his credit to another without the knowledge and at the back of other creditors of the insolvent may be a shrews surprise move that enables the transferor creditor to collect almost if not the entire amount of the said creditor. REMEDY OF THE ASSIGNEE: Section 37 of the Insolvency Law: The creditor coming within this purview is liable to an action by the assignee for double the value of the property so embezzled or disposed of, to be received for the benefit of the insolvents estate. Section 37 constitutes a sort of penal clause which shall be strictly construed. When Sec. 37 does not apply: Not applicable where what has been disposed of is the creditors own credit and not the insolvents property. DIVIDENDS IN INSOLVENCY DIVIDENDS IN INSOLVENCY parcel if the fund arising from the assets of the estate, rightfully allotted to a creditor entitled to share in the fund, whether in the same proportion with other creditors or in a different proportion. It is paid by the assignee only upon order of the court. CLASSIFICATION AND PREFERENCE OF CREDITORS PREFERENCE an exception to the general rule. By it, one person is given a superior right or claim over another. Hence, the law on preferences is strictly construed. (The general rule is that the purpose of insolvency proceeding is the equitable distribution of the insolvents assets among the debtors creditors.)
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POWERS OF THE ASSIGNEE 1. To sue and recover all the estate, debts, and claims belonging to or due to the debtor; 2. To take into his possession all the estate of the debtor except property exempt from execution; 3. In case of non-resident or absconding or concealed debtor, to demand and receive
RULES ON ORDER OF DISTRIBUTION 1. The priorities fixed by law govern 2. The claims which are given priority must be paid in full in the order of their priority, before the general creditors receive anything. 3. Creditors claiming preference must sufficiently establish their credits and their right to preference to entitle them to such preference. ORDER OF DISTRIBUTION (EPPC) 1. Equitable claims under Sec. 48; 2. Preferred claims with respect to specific movable property and specific immovable property under Art. 2241 and 2242 of the CC. 3. Preferred claims as to unencumbered property of the debtor which shall be paid in the order named in Art. 2244 of the CC. 4. Common or ordinary credits which shall be paid pro rata regardless of dates under Art. 2245 of the CC. With reference to specific movable and immovable property of the debtor, the taxes due the State shall first be satisfied. The preferred claims enumerated in Art. 2241 and 2242 are considered as mortgages and pledges of real or personal property or liens within the purview of the Insolvency Law.
1. Mere recommendation that the assignee be appointed; 2. Voting of a secured claim. COMPOSITION - An agreement, made upon a sufficient consideration, between an insolvent or embarrassed debtor and his creditors, whereby the latter for the sake of immediate or sooner payment, agree to accept a dividend less than the whole amount of their claims, to be distributed pro rata, in discharge and satisfaction of the whole debt.
EQUITABLE CLAIMS UNDER THE INSOLVENCY LAW (PD-MN-RCW) Section 48 of the Insolvency Law: Any property found among the property of the insolvent, the ownership of which has not been conveyed to him by legal and irrevocable title, shall not be considered to be property of the insolvent and shall be placed at the disposal of its lawful owners, on order of the court on petition of the assignee or any creditor whose right to QuickTime the estate of the insolvent has beenand a established. TIFF (Uncompressed) decompressor
are needed to see this picture.
COMPOSITION Designates an arrangement between a debtor and the whole body of his creditors (or at least a considerable portion of them) for the liquidation of their claims by the dividend offered.
ACCORD An agreement between a debtor and a single creditor for a discharge of the obligation by a part payment or on different terms.
1. Paraphernal property belonging to the wife of the insolvent; 2. Property held by the insolvent on deposit, administration, lease, or usufruct; 3. Merchandise held by the debtor on commission; 4. Negotiable instruments for collection or remittance; 5. Money held by the debtor for remittance;
VALID
OFFER
OF
WHEN AN INSOLVENT DEBTOR MAY APPLY FOR A DISCHARGE GR: A debtor may apply to the RTC for a discharge at three months to one year after the adjudication of insolvency. Exception: The property of the insolvent has not been converted into money without his fault, thereby delaying the distribution of dividends among the creditors in which case the court may extend the period.
DEBTS RELEASED BY A DISCHARGE 1. All claims, debts, and liabilities, and demands set forth in the schedule; and 2. All claims, debts, liabilities and demands which were or might have been proved against the estate in insolvency DEBTS NOT RELEASED BY DISCHARGE (TEDLICS-REST-SEC) 1. Taxes or assessments due the Government; 2. Any debt created by the fraud or embezzlement of the debtor; 3. Any debt created by the defalcation of the debtor as a public officer or while acting in a fiduciary capacity; 4. Debt of any person liable for the same debt, for or with the insolvent debtor, either as a partner, joint contractor, indorser, surety or otherwise; 5. Debts of a corporation (Reason: Corporation is not granted a discharge) 6. Claim for support (Reason: It will make the law a means of avoiding the enforcement of the obligation) 7. Discharged debt but revived by a subsequent new promise to pay (Reason: Discharge does not end the moral obligation to pay) 8. Debts which have not been duly scheduled in time for proof and allowance. Exception: The creditors had notice or actual knowledge of the insolvency proceedings
1. There must be a parting of the insolvents property; 2. For the benefit of the creditor; 3. Consequent diminution of the insolvents estate; 4. With the result that such creditor receives a greater proportion of his claim than other creditors of the same class. GR: A debtor is not prohibited from paying one creditor in preference to another Exception: In cases mentioned in the Insolvency Law Deposit of money to ones credit on a bank does not create any preference. Reason: The estate of the depositor is not diminished for there is an obligation on the part of the bank to pay the amount of the deposit as soon as the depositor may see fit to draw a check against it.
WHEN FRAUDULENT PREFERENCE EXISTS Fraudulent preference when the debtor procures any part of his property to be attached, sequestered, or seized on execution or makes any payment, pledge, mortgage, assignment, transfer, sale or conveyance of any part of his property, whether directly or indirectly, absolutely or conditionally, to any one under the following circumstances: 1. The debtor is insolvent or in contemplation of insolvency; 2. The transaction in question is made within 30 days before the filing of a petition by or against the debtor; 3. It is made with a view to giving preference to any creditor or person having a claim against him; and 4. The person receiving a benefit thereby has reasonable cause to believe: a. That the debtor is insolvent; b. That the transfer is made with a view to prevent his property from coming to his assignee in insolvency, or to prevent the same from being distributed ratably among his creditors, or to defeat the object of or any way hinder the operation or
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WHEN DISCHARGE MAY BE REVOKED Discharge may be revoked by the court which granted it upon petition of any creditor: 1. Whose debt was proved orand a QuickTime provable against TIFF (Uncompressed) decompressor the estate in insolvency, onpicture. ground that are needed to see this the the discharge was fraudulently obtained; and provided, 2. The petition is filed within one year after the date of the discharge. FRAUDULENT PREFERENCES AND TRANSFERS TRANSFER includes the sale and every other and different modes of disposing of or parting with
WHEN RECEIVER MAY BE APPOINTED Anytime before the election of an assignee, when it appears by the verified petition of a creditor: 1. That the assets of the insolvent or a considerable portion thereof have been pledged, mortgaged, transferred, assigned, conveyed, or seized on legal process in violation of Sec. 70; 2. That it is necessary to commence an action to recover the same; The receiver shall deliver all the property, assets, or effects remaining in his hands to the assignee who shall be substituted for him in all pending actions or proceedings.
WHEN PETITION MAY BE DISMISSED At anytime before the appointment of an assignee: 1. Voluntary petition upon the application of the debtor, if no creditor files written objections; 2. Involuntary petition a. Upon the application of the petitioning creditors; or b. By written consent of all creditors filed in court, in which case, the proceedings may be dismissed at any time. After the appointment of an assignee, dismissal is not allowed without the consent of all parties interested in or affected thereby. WHEN APPEAL MAY SUPREME COURT BE TAKEN TO THE
WHEN FRAUDULENT TRANSFER EXISTS 1. Any payment, pledge, mortgage, conveyance, sale, assignment, or transfer of property of whatever character; 2. Made by the insolvent; 3. Within one month before the filing of the petition in insolvency against him Exception: Transfer for a valuable pecuniary consideration in good faith Effect of fraudulent transfer: Such transfer is VOID RIGHT OF ASSIGNEE (Uncompressed) decompressor TIFF TO RECOVER PROPERTY are needed to see this picture. OR ITS VALUE The creditors of the insolvent are not authorized to institute an independent action. In all actions or proceedings to set aside or nullify fraudulent preferences or transactions as VOID, the assignee appears for, and represents the general creditors.
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From an order granting or refusing: 1. An adjudication in insolvency and in the latter case, from the order fixing the amount of costs, expenses, damages, and attorneys fees allowed the debtor; 2. A creditors claim when the amount in dispute exceeds P300.00
Citibank v. Spouses Cabamongan and Sons, GR No. 146918 (02 May 2006): [1] Simple Loan, [2] Interest Rates, and [3] Oblicon Concept of Diligence; Diligence Required on Banks FACTS: The spouses Cabamongan [hereinafter Spouses] opened a foreign currency time deposit with Citibank, in the amount of $55,216.69 for a term of 182 days. Prior to the maturity of the said deposit, a person claiming to be Carmelita Cabamongan [the wife] pre-terminated the said deposit. Said person presented a Bank of America Versatele Card, and ATM Card, and a Mabuhay Credit Card. She filled up the required documents for pre-termination [from which a discrepancy in signatures was apparent], with the assistance of the banks Acct. Officer, who also interviewed her casually during the said transaction. She failed to bring the original certificate of deposit, so the bank had her execute a release and waiver document in favor of Citibank; the said document was not notarized on the same day, but nevertheless, the money was given to the person withdrawing, with the transaction lasting onlu for 40 minutes. The person withdrawing left an ID with the bank, prompting the said bank to call Carmelita at her listed address. The wife of the Spouses son received the call and was surprised to hear that Carmelita preterminated the deposit because the Spouses were then in the US. She immediately called them and informed them of what happened. Previously, someone broke into the Spouses home in the US, where they reported that only a jewelry box went missing; after the phone call, they discovered that
12%, regardless if it falls within [1] or [2] from such finality until satisfaction, with this interim period being considered a forbearance of money. In a loan of forbearance of money, the interest due should be that stipulated in writing, and in the absence thereof, a rate of 12% / annum counted from the time of demand. Thus, the rate of 2.564% shall apply for the contract period of the deposit [182 days], and the rate of 12% shall apply from the demand. In the intervening period [after 182 but before demand], the interest chargeable shall be interest rate granted by Citibank, since the time deposit provided for roll over upon the maturity of the principal and interest. Damages Moral damages are also owed under Art. 2220 of the Civil Code, because of the gross negligence of the banks officer amounting to bad faith.