CREDIT TRANSACTIONS

[GUARANTY, PLEDGE, MORTGAGE, ANTICHERIS]

GUARANTY
Guaranty is a contract whereby a person, called the guarantor, binds himself to the
creditor to fulfill the obligation of the principal debtor in case the latter should fail to do
so. [Art. 2047]
While a surety undertakes to pay if the principal does not pay, the guarantor only binds
himself to pay if the principal cannot pay [See benefit of excussion, Art. 2058].

Suretyship is 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 a third person (oblige), who is entitled to but one performance, and as
between the two who are bound, the one rather than the other should perform.
If a person binds himself solidarily with the principal debtor, the contract is called
suretyship and the guarantor is called a surety.

GUARANTY DISTINGUISHED FROM SURETYSHIP
Guaranty
Guarantor’s liability depends upon an
independent agreement to pay the
obligation
Guarantor’s engagement
is a collateral undertaking
Guarantor is subsidiarily liable i.e. only
obliged to pay if the principal cannot pay
Guarantor not bound to take notice of
default of his principal
Guarantor often discharged by the mere
indulgence of the creditor and is usually
not liable unless notified of the principal’s
default

Suretyship
Surety assumes liability
as a regular party to the undertaking
Surety is an original Promissory
Surety is primarily liable i.e. bound to pay
if the principal does not pay
Surety ordinarily held to know every
default of his principal
Surety not discharged either by the mere
indulgence of the creditor or by want of
notice of default of the principal

NATURE AND EXTENT OF GUARANTY
(1) A guaranty is generally gratuitous [2048]
(a) General Rule: Guaranty is gratuitous
(b) Exception: When there is a stipulation to the contrary
(2) On the cause of a guaranty contract
A guarantor or surety is bound by the same consideration that makes the contract
effective between the principal parties thereto. [Severino v. Severino]
(a) Presence of cause which supports principal obligation: Cause of the contract is
the same cause which supports the obligation as to the principal debtor. The consideration
which supports the obligation as to the principal debtor is a sufficient consideration to
support the obligation of a guarantor or surety.
(b) Absence of direct consideration or benefit to guarantor: Guaranty or surety
agreement is regarded valid despite the absence of any direct consideration received by
the guarantor or surety, such consideration need not pass directly to the guarantor or
surety; a consideration moving to the principal will suffice.
(3) A married woman who is a guarantor binds only her separate property, generally
[2049]

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CREDIT TRANSACTIONS
[GUARANTY, PLEDGE, MORTGAGE, ANTICHERIS]

Exceptions
(a) With her husband’s consent, bind the community or conjugal
partnership property
(b) Without husband’s consent, in cases provided by law, such as when the
guaranty has redounded to the benefit of the family.
(4) A guaranty need not be undertaken with the knowledge of the debtor [2050]
(a) Guaranty is unilateral – exists for the benefit of the creditor and not for
the benefit of the principal debtor
(b) Creditor has every right to take all possible measures to secure
payment of his credit – guaranty can be constituted even against the will of the
principal debtor
However, as regards payment made by a third person:
(a) Payment without the knowledge or against the will of the debtor:
(i) Guarantor can recover only insofar as the payment has been beneficial
to the debtor [Art. 1236]
(ii) Guarantor cannot compel the creditor to subrogate him in his rights
[Art. 1237]
(b) Payment with knowledge or consent of the debtor: Subrogated to all the rights
which the creditor had against the debtor
(5) The guaranty must be founded on a 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.
(6) A guaranty may secure the performance of a voidable, unenforceable, and natural
obligation [2052(2)]
A guaranty may secure the performance of a:
(a) Voidable contract – such contract is binding, unless it is annulled by a
proper court action
(b) Unenforceable contract – because such contract is not void
(c) Natural obligation – the creditor may proceed against the guarantor
although he has no right of action against the principal debtor for the reason that
the latter’s obligation is not civilly enforceable. When the debtor himself offers a
guaranty for his natural obligation, he impliedly recognizes his liability, thereby
transforming the obligation from a natural into a civil one.
(7) A guaranty may secure a future debt [2053]
Continuing Guaranty or Suretyship:
(a) Under the Civil Code, a guaranty may be given to secure even future debts, the
amount of which may not be known at the time the guaranty is executed. This is the basis
for contracts denominated as continuing guaranty or suretyship. [Diño v. CA]
(b) 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
Rationale: 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.

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A continuing guaranty is one which is not limited to a single transaction. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits. just like obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent. (c) To secure existing unliquidated debts – refers to debts existing at the time of the constitution of the guaranty but the amount thereof is unknown and not to debts not yet incurred and existing at that time. including those arising in the future. (b) Principal obligation subject to a resolutory condition – the happening of the condition extinguishes both the principal obligation and the guaranty (9) A guarantor’s liability cannot exceed the principal obligation [2054] General Rule: Guaranty is a subsidiary and accessory contract – guarantor cannot bind himself for more than the principal debtor and even if he does. covering a series of transactions. ANTICHERIS] (b) To secure payment of any debt to be subsequently incurred – a guaranty shall be construed as continuing when by the terms thereof 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. even without stipulation and even if the surety would thereby become liable to pay more than the total amount stipulated in the bond. the guarantor becomes liable. judicial costs. especially if the right to recall the guaranty is expressly reserved. A guaranty shall be construed as continuing when by the terms thereof 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. A continuing guaranty is one which covers all transactions. (d) The surety agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born. for which. Exceptions (a) Interest.CREDIT TRANSACTIONS [GUARANTY. judicial costs. interest at the legal rate. MORTGAGE.” (8) A guaranty may secure the performance of a conditional obligation [2053] (a) Principal obligation subject to a suspensive condition – the guarantor is liable only after the fulfillment of the condition. Where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one. PLEDGE. and contemplates a succession of liabilities. which are within the description or contemplation of the contract of guaranty. but which contemplates a future course of dealing. generally for an indefinite time or until revoked. and attorney’s fees when appropriate. until the expiration or termination thereof. especially if the right to recall the guaranty is expressly reserved. GARRATON NOTES UNO -RECOLETOS LAW |3 . and attorney’s fees as part of damages may be recovered – creditors suing on a suretyship bond may recover from the surety as part of their damages. 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. as they accrue.

CREDIT TRANSACTIONS [GUARANTY. (c) A demand or notice of default is not required to fix the surety’s liability Exception: Where required by the provisions of the contract of suretyship. (11) Contract of guaranty is covered by the Statute of Frauds [See Art. (b) Penalty may be provided – a surety may be held liable for the penalty provided for in a bond for violation of the condition therein. unless the same or some note or memorandum thereof be in writing. (b) The creditor may sue. (d) A surety bond is void where there is no principal debtor because such an undertaking presupposes that the obligation is to be enforceable against someone else besides the surety. it need not appear in a public document NATURE AND EXTENT OF SURETYSHIP (1) Liability is contractual and accessory but direct (2) Liability is limited by the terms of the contract (3) Liability arises only if principal debtor is held liable (a) In the absence of collusion. 1403(2)(b)] Guaranty must not only be expressed but must so be reduced into writing. the principal debtor and the surety. ANTICHERIS] Interest runs from: (1) Filing of the complaint (upon judicial demand). Principal’s liability may exceed guarantor’s obligations The amount specified in a surety bond as the surety’s obligation does not limit the extent of the damages that may be recovered from the principal. NOT THE DEBTOR The surety makes no covenant or agreement with the principal that it will fulfill the obligation guaranteed for the benefit of the principal. MORTGAGE. evidence. Note: Surety is not entitled to exhaustion (1) THE UNDERTAKING IS TO THE CREDITOR. not by reason of the contract. the latter’s liability being governed by the obligations he assumed under his contract (10) The existence of a guaranty is not presumed [2055] Guaranty requires the expression of consent on the part of the guarantor to be bound. or (2) The time demand was made upon the surety until the principal obligation is fully paid (upon extra-judicial demand) Rationale: Surety is made to pay. or by his agent. the surety is bound by a judgment against the principal even though he was not a party to the proceedings. (b) To make certain that on making it. or a secondary evidence of its contents. However. it shall be unenforceable by action. The surety’s undertaking is that the principal shall fulfill his obligation and that the surety shall be relieved of liability when the obligation secured is performed. separately or together. of the agreement cannot be received without the writing. Hence. therefore. and subscribed by the party charged. It cannot be presumed because of the existence of a contract or principal obligation. PLEDGE. the guarantor proceeded with consciousness of what he was doing. GARRATON NOTES UNO -RECOLETOS LAW |4 . but by reason of his failure to pay when demanded and for having compelled the creditor to resort to the courts to obtain payment. Rationale: (a) There be assurance that the guarantor had the true intention to bind himself. and the latter can always claim that it was never his intention to be the sole person obligated thereby.

Strictissimi juris rule NOT applicable to compensated sureties Reasons: (1) Compensated corporate sureties are business associations organized for the purpose of assuming classified risks in large numbers. PLEDGE. (ii) If he has bound himself solidarily with the debtor. 169 SCRA 66] EFFECTS OF GUARANTY BETWEEN THE GUARANTOR AND THE CREDITOR (1) THE GUARANTOR HAS THE RIGHT TO BENEFIT FROM EXCUSSION/ EXHAUSTION [2058] The guarantor cannot be compelled to pay the creditor unless the latter has: (a) Exhausted all of the property of the debtor. Here. 2059: (i) If the guarantor has expressly renounced it. In accordance therewith. (2) They are secured from all possible loss byadequate counter-bonds or indemnity agreements. [Mercantile Insurance Company v. (iii) In case of insolvency of the debtor – guarantor guarantees the solvency of the debtor. the liability of the guarantor arises as the debtor cannot fulfill his obligation (iv) When the debtor has absconded. If the debtor becomes insolvent. for profit and on an impersonal basis. Such corporations are in fact insurers and in determining their rights and liabilities. (2) PRIOR DEMAND BY THE CREDITOR UPON PRINCIPAL NOT REQUIRED. and (b) Resorted to all the legal remedies against the debtor. MORTGAGE. This rule will apply only after it has been definitely ascertained that the contract is one of suretyship or guaranty. should be protected against unjust pecuniary impoverishment by imposing on the principal. ANTICHERIS] |5 Exception: Unless otherwise expressly provided.debtor. duties akin to those of a fiduciary. The guarantor becomes primarily liable as a solidary co. the rules peculiar to suretyship do not apply. the liability assumed is that of a surety. or cannot be sued within the Philippines – the creditor is not required to go after a debtor who is hiding or cannot be sued in our courts. The stipulation in the indemnity agreement allowing the surety to recover even before it paid the creditor is enforceable. Exceptions to the benefit of excussion (2059) (a) As provided in Art. EXONERATED BY NEGLECT OF CREDITOR TO SUE PRINCIPAL. he renounces in the contract itself the benefit of exhaustion. the surety may demand from the indemnitors even before paying the creditors. and to incur the delays and expenses incident thereto. Ysmael. SURETY IS NOT Strictissimi juris rule applicable only to accommodation surety Reason: An accommodation surety acts without motive of pecuniary gain and hence. In effect. Exception: When the debtor has left a manager or representative GARRATON NOTES UNO -RECOLETOS LAW .CREDIT TRANSACTIONS [GUARANTY.

he must: (i) Set it up against the creditor upon the latter’s demand for payment from him. ANTICHERIS] (v) If it may be presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation – If such judicial action including execution would not satisfy the obligation. It is not necessary that the debtor be judicially declared insolvent. Inc. MORTGAGE. however. (3) THE CREDITOR HAS THE DUTY TO MAKE PRIOR DEMAND FOR PAYMENT FROM THE GUARANTOR 2060) (a) The demand is to be made only after judgment on the debt (b) Joining the guarantor in the suit against the principal debtor is not the demand intended by law. (c) Sufficient to cover the amount of the debt (c) If he is a judicial bondsman and sub. Actual demand has to be made. the guarantor can no longer require the creditor to resort to all such remedies against the debtor as the same would be but a useless formality. until after the properties of the principal debtor shall have been exhausted. may demand exhaustion of all the property of the debtor before he can be compelled to pay.surety (2084) (d) Where a pledge or mortgage has been given by him as a special security (e) If he fails to interpose it as a defense before judgment is rendered against him.” Luzon Steel Corp. to satisfy the latter’s obligation. (2) THE CREDITOR HAS THE RIGHT TO SECURE A JUDGMENT AGAINST THE GUARANTOR PRIOR TO THE EXCUSSION General Rule: An ordinary personal guarantor (NOT a pledgor or mortgagor). Barbosa: “The right of guarantors…to demand exhaustion of the property of the principal debtor. and excussion (previous exhaustion of the property of the debtor) shall not take place "if he (the guarantor) has bound himself solidarily with the debtor". (ii) Point out to the creditor: (a) Available property of the debtor – the guarantor should facilitate the realization of the excussion since he is the most interested in its benefit. guarantor must also point out to the creditor available property (not in litigation or encumbered) of the debtor within the Philippines. exists only when a pledge or a mortgage has not been given as special security for the payment of the principal obligation. (4) THE GUARANTOR HAS THE DUTY TO SET UP THE BENEFIT OF EXCUSSION [2060] As soon as he is required to pay. v. (5) THE CREDITOR HAS THE DUTY TO RESORT TO ALL LEGAL REMEDIES [2058. to a deferment of the execution of said judgment against him. (b) In order that the guarantor may make use of the benefit of excussion.CREDIT TRANSACTIONS [GUARANTY. secure a judgment against the guarantor. PLEDGE. Exception: The creditor may. 2061] GARRATON NOTES UNO -RECOLETOS LAW |6 . Southern Motors. Sia: “The surety in the present case bound itself "jointly and severally" (in solidum) with the defendant. v. (b) Within the Philippine territory – excussion of property located abroad would be a lengthy and extremely difficult proceeding and would not conform with the purpose of the guaranty to provide the creditor with the means of obtaining the fulfillment of the obligation. who shall be entitled. prior thereto.

(b) If he fails to do so. ANTICHERIS] After the guarantor has fulfilled the conditions required for making use of the benefit of excussion. EFFECTS OF GUARANTY BETWEEN THE DEBTOR AND THE GUARANTOR (1) THE GUARANTOR WHO PAYS HAS THE RIGHT TO BE SUBROGATED TO THE RIGHTS OF THE CREDITOR [2067] A guarantor who pays the debt is entitled to every remedy which the creditor has against the principal debtor.CREDIT TRANSACTIONS [GUARANTY. GARRATON NOTES UNO -RECOLETOS LAW |7 . PLEDGE. and his non. and to avail himself of all securities against the debtor The need to enforce the provisions on indemnity in Article 2066 forms the basis for the subrogation clause of Article 2067. (2) THE GUARANTOR HAS THE DUTY TO NOTIFY THE DEBTOR BEFORE PAYING THE CREDITOR [2068]. (b) A compromise between guarantor and the creditor benefits but does not prejudice the principal debtor. to stand in the place of the creditor not only through the medium of the contract. Except when solidarity has been stipulated.appearance shall not constitute default. has the right to be reimbursed for his answering for the obligation of the debtor. w/ its consequential effects. having the right to have those securities transferred to him though there was no stipulation for it. is that the guarantor who is subrogated to the rights of the creditor. and chances to set up such defenses as are afforded him by law (7) A COMPROMISE SHALL NOT PREJUDICE THE PERSON NOT PARTY TO IT [2063] (a) A compromise between creditor and principal debtor benefits the guarantor but does not prejudice him. to enforce every security and all means of payments. (3) THE GUARANTOR CANNOT DEMAND REIMBURSEMENT FOR PAYMENT MADE BY HIM BEFORE THE OBLIGATION HAS BECOME DUE [2069]. is not duty bound to appear in the case. The guarantor will then lose the right of reimbursement and consequently the right of subrogation. Should payment be made without notification. he shall suffer the loss for the insolvency of the debtor. however. The assumption. a co-guarantor is liable only to the extent of his share in the obligation as divided among all the coguarantors. MORTGAGE. Rationale: To give the guarantor the opportunity to allege and substantiate whatever defenses he may have against the principal obligation. but even by means of the securities entered into w/out the knowledge of the surety. (8) CO-GUARANTORS ARE ENTITLED TO THE BENEFIT OF DIVISION [2065] The benefit of division applies only when there are several guarantors and one debtor for a single debt. subrogation will not be proper. The guarantor. however. it becomes the duty of the creditor to: (a) Exhaust all the property of the debtor pointed out by the guarantor. Absent this right of reimbursement. the debtor would be justified in setting up the defense that the obligation has already been extinguished by the time the guarantor made the payment. and supposing the debtor has already made a prior payment. but only to the extent of the value of the said property (6) THE CREDITOR HAS THE DUTY TO NOTIFY THE GUARANTOR IN THE ACTION AGAINST THE DEBTOR [2062] Notice to the guarantor is mandatory in the action against the principal debtor.

one debtor and one debt: (a) The one who pays may demand from each of the others the share proportionally owing to him (b) If any of the guarantors is insolvent. by reason of the expiration of the period for payment. (f) If there are reasonable grounds to fear that the principal debtor intends to abscond. MORTGAGE. including the payer. EFFECTS OF GUARANTY AS BETWEEN CO-GUARANTORS When there are two or more guarantors. (e) After the lapse of 10 years. the other guarantors may interpose such defenses against the paying guarantor as are available to the debtor against the creditor. (b) In case of insolvency of the principal debtor. As such. EXTINGUISHMENT OF GUARANTY (1) Once the obligation of the debtor is extinguished in any manner provided in the Civil Code. or demand security that shall protect him from any proceeding by the creditor. unless it be of such nature that it cannot be extinguished except within a period longer than 10 years. (c) When the debtor has bound himself to relieve him from the guaranty within a specified period. (2) The payment was made because (a) Of the insolvency of the debtor. obtain release from the guaranty. However. except those that are personal to the debtor [Art. 2071) (a) When he is sued for the payment. and against the insolvency of the debtor. in the same proportion [Art. Exceptions (Art. GARRATON NOTES UNO -RECOLETOS LAW |8 . the obligation of the guarantor is also extinguished [2076]. ANTICHERIS] General Rule: Since a contract of guaranty is only subsidiary. he may. 2073: (1) Payment has been made by one guarantor. in the alternative. Exception: Prior consent or subsequent ratification by the debtor (4) THE GUARANTOR MAY PROCEED AGAINST THE DEBTOR EVEN BEFORE PAYMENT HAS BEEN MADE [2071] General Rule: Guarantor has no cause of action against the debtor until after the former has paid the obligation. Rationale: 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. 2074] Requisites for the applicability of Art. 2073] For purposes of proportionate reimbursement. PLEDGE. and this period has expired. (d) When the debt has become demandable. the guarantor cannot be liable for the obligation before the period on which the debtor’s Liability will accrue. or (b) By judicial demand (3) The paying guarantor seeks to be indemnified only to the extent of his proportionate share in the total obligation. his share shall be borne by the others. Any payment made by the guarantor before the obligation is due cannot be indemnified by the debtor. (g) If the principal debtor is in imminent danger of becoming insolvent.CREDIT TRANSACTIONS [GUARANTY. when the principal obligation has no fixed period for its maturity.

(a) Reason: They are not mere guarantors. (2) pursuant to an enforceable agreement between the principal and the creditor. (2) Although the guarantor generally has to make payment in money. This is to protect the interest of the guarantor should the debtor be insolvent during the period of extension and deprive the guarantor of his right to reimbursement. if accepted by the creditor. Bondsman – a surety offered in virtue of a provision of law or a judicial order. If the person required to give a legal or judicial bond should not be able to do so. (4) A guarantor is released if the creditor. (b) 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. GARRATON NOTES UNO -RECOLETOS LAW |9 . without the guarantor’s consent. any other thing of value. 2056] (1) He possesses integrity. it should appear that the extension was for (1) a definite period. (b) Pledge or mortgage is a property or real security. mortgages and preferences of the latter. QUALIFICATIONS OF PERSONAL BONDSMAN [2082 IN RELATION TO ART. November 12. MORTGAGE. the obligation of the debtor still subsists. [Art. [2080] In order to constitute an extension discharging the surety. a pledge or mortgage sufficient to cover the obligation shall be admitted in lieu thereof. after the extinguishment of the guarantor’s obligation (as in the case of a release from the guaranty). 2003) LEGAL AND JUDICIAL BONDS Bond – an undertaking that is sufficiently secured.CREDIT TRANSACTIONS [GUARANTY. ANTICHERIS] there may be instances when. BONDSMAN NOT ENTITLED TO EXCUSSION [2084] A judicial bondsman and the sub-surety are not entitled to the benefit of excussion. (5) The guarantors are released if by some act of the creditor they cannot be subrogated to the rights. CA. but sureties whose liability is primary and solidary. and not cash or currency. (3) If one guarantor is released without the consent of the others.2085 in relation to 2093] PROVISIONS APPLICABLE ONLY TO PLEDGE (1) Transfer of possession to the creditor or to third person by common agreement is essential [2093]. the release would benefit the coguarantors to the extent of the proportionate share of the guarantor released [2078]. PLEDGE. (Filipinas Textile Mills v. the thing delivered shall be returned with all its fruits and accessions. PLEDGE OR MORTGAGE IN LIEU OF BOND [2083] (a) Guaranty or suretyship is a personal security. PLEDGE Pledge is a contract by virtue of which the debtor delivers to the creditor or to a third person a movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled. extends the time within which the debtor may perform his obligation [2079]. and (3) that it was made without the consent of the surety or with a reservation of rights with respect to him. (3) He has sufficient property to answer for the obligation which he guarantees. (2) He has capacity to bind himself. is valid payment and therefore releases the guarantor [dacion en pago] [2077].

unless there is a contrary stipulation [2100]. ANTICHERIS] (a) Actual delivery is important. ESSENTIAL REQUISITES COMMON TO PLEDGE AND MORTGAGE [ART. the thing pledged or mortgaged may be alienated for the payment to the creditor. 1951]. (4) Cannot exist without a valid obligation. (5) Debtor retains the ownership of the thing given as a security. there is danger of destruction. 2085] (1) Constituted to secure the fulfillment of a principal obligation. (4) Pledge shall take effect against 3rd persons only if the following appear in a public instrument: (a) Description of the thing pledged. (6) Creditor has the right to retain the thing in his possession or in that of a third person to whom it has been delivered. that they be legally authorized for the purpose. The instruments representing the pledged rights shall be delivered to the creditor. (Manila Banking Corp. until the debt is paid [2098]. (2) Legal – Created by operation of law. (b) Date of the pledge [2096]. Ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation. (b) Constructive 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. impairment or dimunition in value of the thing. In case of doubt as to whether a transaction is a pledge or a dation in payment. (5) The thing pledged may be alienated by the pledgor or owner only with the consent of the pledgee. RIGHTS OF PLEDGOR (1) Takes responsibility for the flaws of the thing pledged [2101 in relation to Art. (3) Has no right to use the thing or to appropriate its fruits without authority from the owner [2104] (4) May cause the public sale of the thing pledged if. without fault on his part. the latter being the lesser transmission of rights and interests. and in the absence thereof. MORTGAGE. they must be indorsed [2095]. (2) Pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. GARRATON NOTES UNO -RECOLETOS LAW | 10 . (6) When the principal obligation becomes due. v. The proceeds of the auction shall be a security for the principal obligation [2108]. but the latter shall continue to have possession [2097]. (7) Special Laws apply to pawnshops and establishments engaged in making loans secured by pledges. (3) Incorporeal rights may be pledged. 2087] OBLIGATION OF PLEDGEE (1) The pledgee cannot deposit the thing pledged with a 3rd person. (2) Is responsible for the acts of his agents or employees with respect to the thing pledged [2100]. if negotiable.CREDIT TRANSACTIONS [GUARANTY. (2) All movables within the commerce of man may be pledged as long as they are susceptible of possession [2094]. [Art. Teodoro. 169 SCRA 95) KINDS (1) Voluntary or conventional – Created by agreement of parties. Provisions of the Civil Code shall apply subsidiarily to them. (3) The persons constituting the pledge or mortgage have the free disposal of their property. the presumption is in favor of pledge. PLEDGE.

PLEDGE BY OPERATION OF LAW – ART. nor appropriate to himself. (a) Useful expenses shall be refunded only to the possessor in good faith with the same right of retention. (2) If the price of sale is more than amount due. Yuliongsiu vs. the thing given in pledge. If by the contract of pledge the pledgor continues to be the owner of the thing pledged during the pendency of the obligation. EFFECT OF THE SALE OF THE THING PLEDGED [Art 2115] (1) Extinguishes the principal obligation. (2) Sale must be at a public auction. In such a case. Atendido: according to law. whether the proceeds of the sale is more or less than the amount due. a second one with the same formalities shall be held. the pledgor is regarded as holding the pledged property merely as trustee for the pledgee. the person who has defeated him in the GARRATON NOTES UNO -RECOLETOS LAW | 11 . The type of delivery will depend upon the nature and the peculiar circumstances of each case. stating the amount due. the creditor may appropriate the thing pledged but he shall give an acquittance (release) for his entire claim. IF CREDIT IS NOT PAID ON TIME (ART 2112) (1) Debt is due and unpaid. if through the negligence or willful act of the pledgee the thing is in danger of being lost or impaired [2106]. (3) Notice to the pledgor and owner. there is no sale either. a description of the thing pledged and the date of the pledge should appear in a public instrument [2096] FORECLOSURE ARTS. the debtor is not entitled to the excess unless the contrary is provided. PNB: There is authority supporting the proposition that the pledgee can temporarily entrust the physical possession of the chattels pledged to the pledgor without invalidating the pledge. 2112. (6) If at the second auction. (5) If at the first auction the thing is not sold. PERFECTION – ARTS. the loss should be borne by the pledgor. unless and until he has paid the debt and its interest. 2121] (1) Necessary expenses shall be refunded to every possessor. but only a possessor in good faith may retain the thing until he has been reimbursed. MORTGAGE. (4) Sale must be made with the intervention of a notary public. 2115 REQUIREMENTS IN SALE OF THE THING PLEDGED BY A CREDITOR. 2096 REQUISITES FOR PERFECTION (1) The thing pledged is placed in the possession of the creditor or a third person [2093] (2) For the pledge to take effect as against third persons. (3) Subject to the right of the pledgee under article 2108.2122 LEGAL PLEDGES/PLEDGE BY OPERATION OF LAW [Art. (3) If the price of sale is less. 2093. PLEDGE. ANTICHERIS] (2) Cannot ask for the return of the thing against the will of the creditor. 2121. a pledgee cannot become the owner of. with expenses in a proper case [2105]. PNB vs. it stands to reason that in case of loss of the property. A contrary stipulation is void. the creditor is not entitled to recover the deficiency. (4) May require that the thing be deposited with a 3rd person.CREDIT TRANSACTIONS [GUARANTY. pledgor is allowed to substitute the thing which is in danger of destruction or impairment without any fault on the part of the pledgee with another thing of the same kind and quality [2107].

Public document is enough third persons to bind third persons Right to Excess of Proceeds of Sale The excess goes to the debtor/ mortgagor The excess goes to the pledgee/creditor. except if covered by recover any deficiency after the property is Recto Law sold. insofar as they are not in conflict with the Chattel Mortgage Law shall be applicable to chattel mortgages [Art. ANTICHERIS] possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired and by reason thereof [Art. 546] (2) He who has executed work upon a movable has a right to retain it by way of pledge until he is paid. [Art. (a) Future property cannot be an object of mortgage. PLEDGE. 2124] (1) Immovables (2) Alienable real rights over immovables. a stipulation subjecting to the mortgage improvements which the mortgagor may subsequently acquire. This is called the mechanic’s lien. [Art. the remainder of the price of the sale shall be delivered to the obligor. notwithstanding contrary stipulation Note: The provisions of the Civil Code on pledge. CHARACTERISTICS GARRATON NOTES UNO -RECOLETOS LAW | 12 . (2) Public auction of legal pledges may only be executed after demand of the amount for which the thing is retained.CREDIT TRANSACTIONS [GUARANTY. It shall take place within one month after the demand. however. 1731] (3) The agent may retain the things which are the objects of agency until the principal effects the reimbursement and pays the indemnity. provided s/he is able to show that the creditor did not cause the public sale without justifiable grounds. 1914] (4) The laborer’s wages shall be a lien on the goods manufactured or the work done. 2140. [Article 2122] DISTINGUISHED FROM CHATTEL MORTGAGE – ARTS. MORTGAGE. otherwise the pledger may demand the return of the thing pledged. 2141] REAL MORTGAGE Mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation. 1484 Chattel Mortgager Pledge Delivery of Personal Property Not required Delivery is required for the validity of the pledge Registration in the Chattel Mortgage Register Necessary for validity of the CM against Not necessary. This is called the agent’s lien. unless otherwise stipulated Right to Recover Deficiency Creditor/ mortgagee can recover from the Creditor/ mortgagee is not entitled to debtor/ mortgagor. [Art. OBJECTS OF REAL MORTGAGE [Art. immediately making immovable property or real rights answerable to the principal obligation in case it is not complied with at the time stipulated. install or use in connection with real property already mortgaged belonging to the mortgagor is valid. 1707] Note: (1) In legal pledges.

CA: A mortgage directly and immediately subjects the property upon which it is imposed. 1454. It merely restricts the mortgagor’s jus disponendi over the property. 1602. and/or amount received from expropriation for public use [Art. The mortgagor may still sell the property. and in other laws [Article 2082] (c) If the person bound to give a bond should not be able to do so. [Central Bank v. capacity to bind himself. the mortgagor retains possession of the property. CA. 1450. (3) Mortgage creates an encumbrance over the property. 2127] (a) Applies only when the accessions and accessories subsequently introduced belongs to the mortgagor. a pledge or mortgage considered sufficient to recover his obligation shall be admitted in lieu thereof [Article 2083] (3) Equitable – One which. PRINCIPLE OF INDIVISIBILITY OF PLEDGE/MORTGAGE [ART. CA: Where only a portion of the loan is released. It is indivisible even though the debt may be divided. shows the intention of the parties to make the property a security for the debt. He may deliver said property to the mortgagee without altering the nature of the contract of mortgage. the mortgage becomes enforceable only as to the proportionate value ofthe loan Indivisibility applies only as to pledgors/mortgagors who are themselves debtors in the principal obligation. or that the interest as compensation for the use of the principal and the enjoyment of its fruits be in the form of a certain percentage thereof. or the fruits must be collected before the obligation becomes due. 2130] (4) Mortgage extends to the natural accessions. 1603. 1604 and 1607. there must be an express stipulation.CREDIT TRANSACTIONS [GUARANTY. (b) To exclude them. (c) Third persons who introduce improvements upon the mortgaged property may remove them at any time The consideration of the accessory contract of real estate mortgage is the same as that of the principal contract.: Pacto de retro (b) Provisions governing equitable mortgage: Arts. and not to accommodation pledgors/mortgagors GARRATON NOTES UNO -RECOLETOS LAW | 13 . and such indivisibility is likewise unaffected by the fact that the debtors are not solidarity liable. and sufficient property to answer for the obligation). PLEDGE. but ownership of the property is not parted with. (2) It is not an essential requisite that the principal of the credit bears interest. and any stipulation to the contrary is void [Art. (b) Central Bank v. 2089 TO 2090] (a) Dayrit v. (a) Lien created through equitable mortgage ought not to be defeated by requiring compliance with formalities necessary to the validity of a voluntary real estate mortgage. 139 SCRA 46] KINDS (1) Voluntary – constituted by the will of the owner of the property on which it is created (2) Legal – required by law to be executed in favor of certain persons: (a) Persons in whose favor the law establishes a mortgage have no other right than to demand the execution and recording of the document in which the mortgage is formalized [Article 2125] (b) The bondsman who is to be offered in virtue of a provision of law or of a judicial order shall have the qualifications prescribed in Art 2056 (integrity. Ex. to the improvements of growing fruits and the rents or income NOT YET RECEIVED when the obligation becomes DUE. 1365. including indemnity from insurance. MORTGAGE. although lacking the proper formalities of a mortgage. ANTICHERIS] (1) As a general rule.

ANTICHERIS] "When several things are pledged or mortgaged. Note: The mortgage would still be binding between the parties even if the instrument is not recorded. GARRATON NOTES UNO -RECOLETOS LAW | 14 . The correct test. the conveyance may be held to be merely a security for the debt or an indemnity against the liability. ROC: (a) May be availed of by bringing an action in the proper court which has jurisdiction over the area wherein the real or personal (in case of chattel mortgage) property involved or a portion thereof is situated. 2085] (4) Cannot exist without a valid obligation. or the stipulation stating that on the occasion of the mortgagor’s default. If such exists. Sierra.CREDIT TRANSACTIONS [GUARANTY. FORECLOSURE OF MORTGAGE It is the remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation secured by the mortgage. (3) The persons constituting the pledge or mortgage have the free disposal of their property. EXCEPT when the mortgage contract intends to secure future loans or advancements (b) BLANKET mortgage/DRAGNET– mortgage that subsumes all debts of past or future origin (c) Mortgage may be used as a “continuing security” which secures future advancements and is not discharged by the repayment of the amount in the mortgage (d) Alienation or assignment of mortgage credit is valid even if it is not registered Acceleration Clause. 93 SCRA 473) ESSENTIAL REQUISITES COMMON TO PLEDGE AND MORTGAGE (1) Constituted to secure the fulfillment of a principal obligation. and the creditor does not have to divide his action by distributing the debt among the various things pledged or mortgaged. the pledges or mortgage. are considered separate from each other. all the things are still liable for such balance. MORTGAGE. the thing pledged or mortgaged may be alienated for the payment to the creditor. (a) In General: An action for foreclosure of a mortgage is limited to the amount mentioned in the mortgage. [Art. [Art. the whole sum remaining unpaid automatically becomes due and demandable. where it can be applied. (Reyes v. (6) When the principal obligation becomes due. is ALLOWED KINDS OF FORECLOSURE (1) Judicial Foreclosure (2) Extrajudicial Foreclosure JUDICIAL FORECLOSURE Rule 68. each thing for a determinate portion of the debt. 2087] (7) Must be recorded in the Registry of Property in order to be validly constituted. Even when only a part of the debt remains unpaid. that they be legally authorized for the purpose. (5) Debtor retains the ownership of the thing given as a security. (2) Pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged. is the continued existence of a debt or liability between the parties." [Tolentino] The question is whether or not the written instrument in controversy was a mortgage OR a conditional sale. Note: Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. all of them are liable for the debt. But when the several things are given to secure the same debt in its entirety. PLEDGE. and in the absence thereof.

Hence. shall order the property to be sold to the highest bidder at a public auction. where there is no contractual stipulation therefor. if the mortgagee is a bank. ANTICHERIS] (b) If the court finds the complaint to be well founded. which is similar to the equity of redemption. the court. it shall operate to divest the rights of all parties to the action and to vest their rights to the purchaser subject to such rights of redemption as may be allowed by law. MORTGAGE. The TCT must be registered within THREE MONTHS after the foreclosure. However. (c) Claims of junior encumbrancers or persons holding subsequent mortgages in the order of their priority. (6) Debtor (who must be a NATURAL PERSON) has the right to redeem the property sold within 1 year from and after the date of sale. (2) Foreclosure is only the result or incident of the failure to pay debt. then there is no right of redemption. (3) Public sale should be made after proper notice to the public. Proper notice consists of: (a) Posting notice in three public places and/or (b) Publication in newspaper of general circulation Purpose of notice is to obtain the best bid for the foreclosed property (5) Surplus proceeds of foreclosure sale belong to the mortgagor. (c) Upon confirmation of the sale by the court.CREDIT TRANSACTIONS [GUARANTY. GARRATON NOTES UNO -RECOLETOS LAW | 15 . If the mortgagor fails to pay at the time directed. (7) Remedy of party aggrieved by foreclosure is a petition to set aside sale and the cancellation of writ of possession. if any shall be paid to the mortgagor. it may redeem the property BEFORE the registration of the TCT to the buyer. (3) Survives death of mortgagor. otherwise it is a jurisdictional defect which could render the sale voidable. (2) Authority is not extinguished by death of mortgagor or mortgagee. PLEDGE. the mortgagor is required to post a bond equal to the value of the mortgagee’s claim. jurisdiction may be acquired through publication. This is an agency coupled with interest. Nature of Judicial Foreclosure Proceedings (1) Quasi in rem action. EXTRAJUDICIAL FORECLOSURE [ACT NO. (4) There is no need to notify the mortgagor. (d) Before the confirmation. acknowledged and recorded The Proceeds of the Sale shall be applied to the Payment of the: (a) Costs of the sale. and (d) Balance. it shall order the mortgagor to pay the amount due with interest and other charges within a period of not less than 90 days nor more than 120 days from the entry of judgment. (b) Amount due the mortgagee. However. (b) The mortgagor can only legally transfer the right to redeem and the use of the property during the period of redemption. (a) If the mortgagee is a bank and the debtor is a juridical person. 3135] (1) Applies to mortgages where the authority to foreclose is granted to the mortgagee. upon motion. the court retains control of the proceedings (e) Execution of judgment subject to APPEAL but not annulment (f) The foreclosure of the property is completed only when the sheriff’s certificate is executed.

provided that the public auction was regularly and honestly conducted. (3) The value of the mortgaged property has no bearing on the bid price at the public auction. upon the theory that the lesser the price the easier it is for the owner to redeem. (a) Exception: Where the price is so inadequate as to shock the conscience of the court. (b) Foreclosure retroacts to the date of registration of mortgage. Right of mortgagee to recover deficiency (1) Mortgagee is entitled to recover deficiency. (3) A prerogative of the mortgagee. PLEDGE. is null and void. MORTGAGE. ROC. A suit for the recovery of the deficiency after the foreclosure of a mortgage is in the nature of a mortgage action because its purpose is precisely to enforce the mortgage contract. the nonpayment of the mortgage debt. This is because he only has one cause of action. [Caltex v. (2) An ancillary stipulation. Note: (a) Both should be distinguished from execution sale governed by Rule 39. 176 SCRA 741] Waiver of security by creditor (1) Mortgagee may waive the right to foreclose his mortgage and maintain a personal action for recovery of the indebtedness. Nature of Power of Foreclosure by Extrajudicial Sale (1) Conferred for mortgagee’s protection. it is the right of the mortgagor to redeem the mortgaged property by paying the secured debt within the 120 day period from entry of judgment or GARRATON NOTES UNO -RECOLETOS LAW | 16 . ANTICHERIS] (8) Republication of the notice of sale is necessary for the validity of the postponed extrajudicial sale (9) In foreclosure of real estate mortgage under Act 3135. or the minimum price at which the property shall be sold to become operative in the event of a foreclosure sale at public auction. (4) Action to recover prescribes after 10 years from the time the right of action accrues. Effect of inadequacy of price in foreclosure sale (1) Where there is right to redeem. Redemption (1) It is a transaction by which the mortgagor reacquires the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created (2) Kinds: (a) Equity of redemption: in judicial foreclosure of real estate mortgage under the ROC. (c) A stipulation of upset price. (2) Mortgagee cannot have both remedies. (2) Property may be sold for less than its fair market value. IAC.CREDIT TRANSACTIONS [GUARANTY. (2) If the deficiency is embodied in a judgment. (3) Action for recovery of deficiency may be filed even during redemption period. the buyer at auction may petition the land registration court for a writ of possession pending the one-year period of redemption of the foreclosed property. it is referred to as deficiency judgment. taking into consideration the peculiar circumstances. inadequacy of price is immaterial because the judgment debtor may redeem the property.

Creditor may avoid said obligation by: (a) compelling the debtor to reacquire enjoyment of the property (b) by stipulation to the contrary (2) To apply all the fruits. e. if owing. On the contrary. CA: The rule up to now is that the right of a purchaser at a foreclosure sale is merely inchoate until after the period of redemption has expired without the right being exercised. 2135]. 2134] SPECIAL REQUISITES: (1) It can cover only the fruits of an immovable property (2) Delivery of the immovable is necessary for the creditor to receive the fruits. 2134] (4) Express agreement that debtor will give possession of the property to creditor and that the latter will apply the fruits to the interest. but before the sale of the mortgaged property or confirmation of sale (i) formal offer to redeem preserves the right of redemption. to the payment of interest. by filing an action to enforce the right to redeem (b) Right of redemption: in extrajudicial foreclosure of real estate mortgage. then to the principal of his credit NOTE: The obligation to pay interest is not the essence of the contract of antichresis. ANTICHERIS] after the foreclosure sale. the right of the mortgagor to redeem the property within a certain period after it was sold for the satisfaction of the debt. in the mortgagor or his grantee until the expiration of the redemption period and conveyance by the master's deed ANTICHRESIS Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an immovable of the debtor. not to make the contract binding (3) Amount of principal and interest must be specified in writing [Art. there being nothing in the Code to show that antichresis is only applicable to securing the payment of interest bearing loans.g. after receiving them. if owing. including necessary expenses [Art. if any. with the obligation to apply then to the payment of the interest. The title to land sold under mortgage foreclosure remains. MORTGAGE. PLEDGE. and thereafter to the principal of the credit [Art 2132] CHARACTERISTICS (1) Accessory contract – it secures the performance of a principal obligation (2) Formal contract – it must be in a specified form to be valid [Art. 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 NON-PAYMENT OF DEBT GARRATON NOTES UNO -RECOLETOS LAW | 17 . Medida v.CREDIT TRANSACTIONS [GUARANTY. antichresis is susceptible of guaranteeing all kinds of obligations. pure or conditional OBLIGATIONS OF ANTICHRETIC CREDITOR (1) To pay taxes and charges on the estate.. (ii) For natural persons – one year from the registration of the TCT (iii) For juridical persons – three months from the foreclosure (iv) Formal offer to redeem must be with tender of redemption price to preserve right of redemption Note: There is no right of redemption in pledge and chattel mortgage.

CREDIT TRANSACTIONS [GUARANTY. Act 1508] CHARACTERISTICS (1) It is an accessory contract because it secures performance of a principal obligation (2) It is a formal contract because it requires registration in the Chattel Mortgage Register for its validity (but only as against third persons) (3) It is a unilateral contract because it produces only obligations on the part of the creditor to free the thing from the encumbrance on fulfillment of the obligation. El Hogar Filipino. the mortgage and sale immediately become void. 68 Phil 712] (b) A stipulation authorizing the antichretic creditor to appropriate the property upon the non-payment of the debt within the agreed period is void [Art. 2137] (a) The parties. EFFECT OF REGISTRATION (1) Creates real rights (2) Adds nothing to mortgage REGISTRATION OF ASSIGNMENT OF MORTGAGE NOT REQUIRED (a) A chattel mortgage may be alienated or assigned to a third person (b) The debtor is protected if he pays his creditor without actual knowledge that the debt has been assigned (c) Affidavit of good faith is required. Inc. may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge [Tavera v. PLEDGE. AFFIDAVIT OF GOOD FAITH is 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. the condition being that the sale shall be void upon the seller paying to the purchaser a sum of money or doing some other act named.” Effect of Absence: Mortgage is vitiated only as against third persons without notice. (4) The excess of the proceeds of the sale goes to the debtor/mortgagor (5) Creditor/mortgagee can recover deficiency from the debtor/mortgagor. VENUE OF REGISTRATION GARRATON NOTES UNO -RECOLETOS LAW | 18 . and the mortgagee is thereby divested of his title. [Section 3. MORTGAGE. If the condition is performed according to its terms. or the performance of some other obligation specified therein. however. 2088] CHATTEL MORTGAGE DEFINITION AND CHARACTERISTICS Chattel Mortgage is a conditional sale of personal property as security for the payment of a debt. except if covered by the Recto Law REGISTRATION PERIOD WITHIN WHICH REGISTRATION SHOULD BE MADE The law is substantially and sufficiently complied with where the registration is made by the mortgagee before the mortgagor has complied with his principal obligation and no right of innocent third persons is prejudiced. ANTICHERIS] (1) Action for specific performance (2) Petition for the sale of the real property as in a foreclosure of mortgage under Rule 68 of the Rules of Court [Art.

shall make and subscribe an affidavit in the form prescribed by law.CREDIT TRANSACTIONS [GUARANTY. the mortgagee may enter upon the premises. age. in the office of the register of deeds of the province in which the mortgagor resides at the time of the making of the chattel mortgage (b) If he does not reside in the Philippines. Large cattle as chattel mortgage The description in the mortgage shall contain the brands. care for and protect the crop while growing. Act 1508] DESCRIPTION OF PROPERTY The mortgaged property should be described such as to enable the parties to the mortgage. his agent or attorney. Growing crops as chattel mortgage The mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend. or any other person. 4. 5. shall be paid to the mortgagor or those entitled to the same. [Sec. MORTGAGE. treasurer. his executors or administrators unless: (1) The possession of the property is delivered to and retained by the mortgagee or (2) The mortgage is recorded. [Sec. and other marks of ownership as described and set forth in the certificate of ownership of said animal/s. take all the necessary measures for the protection of said crop. knots of radiated hair commonly known as remolinos or cowlicks. cashier. after reasonable inquiry and investigation. class. and selling the crop and the amount of the indebtedness or obligation secured by the mortgage. GARRATON NOTES UNO -RECOLETOS LAW | 19 . sex. Act 1508) FORMAL REQUISITES (a) It should substantially comply with the form prescribed by law (b) It should be signed by the person/s executing the same in the presence of two witnesses who shall sign the mortgage as witnesses to the execution thereof and (c) Each mortgagor and mortgagee or. or by a person authorized to make or receive such mortgage. When a partnership is a party. the affidavit may be made and subscribed by one member thereof. in the province in which the property is situated (c) If the property is situated in a province different from that in which the mortgagor resides. signed by the parties to the mortgage and the two witnesses and the certificate of the oath signed by the person authorized to administer an oath shall be appended to such mortgage and recorded therewith. ANTICHERIS] (a) If he resides in the Philippines. which affidavit. to identify the same. the affidavit may be made and subscribed by a director. and from the proceeds of such sale pay all expenses incurred in caring for. in the absence of the mortgagee. VALIDITY OF CHATTEL MORTGAGE Chattel mortgage shall not be valid against any person except the mortgagor. and the surplus. if any. and that in default of the performance of such duties. PLEDGE. Act 1508] When a corporation is a party to a chattel mortgage. and faithfully and without delay to harvest the same. together with the number and place of issue of such certificates of ownership. 4. (Sec. trustee. and retain possession thereof and sell the same. or manager thereof. harvesting. the mortgage shall be recorded in both provinces.

and (4) The mortgagee. twenty pesos for his neglect and all damages occasioned thereby in an action in any court having jurisdiction of the subject-matter thereof. ENLIGHTEN ME. GRANT THAT I MAY LIKE YOU SUCCEED IN THE (HERE MENTION THE NAME OF EXAMINATION EG. or assign shall notify the mortgagor or person holding under him and the persons holding subsequent mortgages of the time and place of sale at least 10 days previous to the sale: (a) either by notice in writing directed to him or left at his abode. THE ONLY PREPOSITION YOU KNEW. or (b) sent by mail if he does not reside in such municipality DISPOSITION OF PROCEEDS The proceeds of the sale shall be applied to the payment: (1) First. does not within ten days after being requested thereto by any person entitled to redeem. if within the municipality. discharge the mortgage in the manner provided by law. PLEDGE. JOSEPH OF CUPERTINO WHO BY YOUR PRAYER OBTAINED FROM GOD TO BE ASKED AT YOUR EXAMINATION. [Sec. at or after the time fixed for the performance. Act 1508] Breaches Failure of mortgagee to discharge the mortgage If the mortgagee. (1) after performance of the condition before or after the breach thereof. anything in the mortgage to the contrary notwithstanding. his executor. GARRATON NOTES UNO -RECOLETOS LAW | 20 . assign. 8] When the condition of the chattel mortgage is broken. JOSEPH OF CUPERTINO PRAY FOR ME O HOLY GHOST ENLIGHTEN ME OUR LADY OF GOOD STUDIES PRAY FOR ME SACRED HEAD OF JESUS. JOSEPH OF CUPERTINO FOR SUCCESS IN EXAMINATIONS O ST. O ST. or either of them. HISTORY PAPER I ) EXAMINATION. administrator. a mortgagor or person holding a subsequent mortgage. or where the property is situated (3) Provided at least 10 day-notice of the time. administrator. and purpose of such sale has been posted at 2 or more public places in such municipality. his executor. MORTGAGE. ANTICHERIS] PROPERTY COVERED BY CM It is deemed to cover only the property described therein and not like or substituted property thereafter acquired by the mortgagor and placed in the same depository as the property originally mortgaged. to the costs and expenses of mortgage (2) The residue shall be paid to persons holding subsequent mortgages in their order (3) The balance. after paying the mortgages. An attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the mortgage in the same manner that the mortgagee could foreclose it Foreclosure The mortgagee. executor. the person entitled to redeem may recover of the person whose duty it is to discharge the same. shall be paid to the mortgagor or person holding under him on demand ***END OF NOTES*** PRAYER TO ST. administrator or assign may cause the mortgaged property or any part thereof to be sold at a public auction by a public officer: (1) After 30 days from the time of condition broken (2) At a public place in the municipality where the mortgagor resides. or (2) after tender of the performance of the condition. 8.CREDIT TRANSACTIONS [GUARANTY. or a subsequent attaching creditor may redeem the same by paying or delivering to the mortgagee the amount due on such mortgage and the reasonable costs and expenses incurred by such breach of condition before the sale thereof. place. SEAT OF DIVINE WISDOM. [Sec. IN RETURN I PROMISE TO MAKE YOU KNOWN AND CAUSE YOU TO BE INVOKED.