WAREHOUSE RECEIPTS LAW
QUAMTO in the care and custody of the things
Surrendering of Possession; Lien (2009)
A lien is dependent on possession. When a
warehouseman surrenders possession, he
thereby loses his lien on the goods over
which hi no longer has possession
Delivery of Goods (2007)
A. The warehouseman should deliver the
goods upon demand to Caloy who is a holder
of the receipt in good faith and for value. The
goods cannot be levied upon by the creditor
of Alex after it was negotiated to Caloy
(Section 25, Negotiable Instruments Law).
B. My answer would not be the same if the
warehousemen issued a non- negotiable
warehouse receipt. In such case. The
warehouseman should deliver the goods to
Datio, if the notice of levy was served on the
warehouseman prior to the notification of
the warehouseman by Alex or Caloy of the
transfer of the non-negotiable receipt. In
such case, the title of Caloy would be
defeated by the notice of levy by Dario
(Section 42, Warehouse Receipts Law).
a. should deliver the goods to Caloy. Under
the Billy Warehouse Receipts Act, the goods
covered by the negotiable receipt cannot be
attached or levied upon directly by the
creditor. The creditor must resort to
attaching or levying the receipt itself, not the
goods, while in the possession of the debtor,
Alex. Since Alex has already negotiated it to
Caloy, Dario cannot anymore attach or levy
the goods under the warehouse receipt.
b. A non-negotiable warehouse receipt is
transferred thru simple assignment. Since
Alex negotiated it instead of having it
assigned, the conveyance of the warehouse
receipt to Caloy is not valid; hence, Alex is
still the owner of the said goods. Dario could
now attach or levy the goods.
(2015)
a. EJ has better right to the goods. The goods
are covered by a negotiable warehouse
receipt which was indorsed to EJ for value.
The negotiation to EJ was not impaired by
the fact that Jojo took the goods without the
consent of Melchor, as EJ had no notice of
such fact. Moreover, EJ is in possession of
the warehouse receipt and only he can
surrender it to the warehouseman. (Sec. 8,
Warehouse Receipts Law)
b. Under the Sec. 17 of Act 2137, Warehouse
Receipt Law, SN Warehouse Corporation may
file an action for interpleader and implead EJ
and Melchor to determine who is entitled to
the said goods.
(2000 Bar)
The stipulation that W would not be
responsible for the loss of all or any portion
of the hardware materials covered by the
receipt even if such loss is caused by the
negligence of W or his representative or
employees is void. The law requires that a
warehouseman should exercise due diligence (b) an offer to surrender the receipt, if
negotiable, with such indorsements as would
deposited in his warehouse. be necessary for the negotiation thereof, and
(c) readiness and willingness to sign when
(1999 Bar) the goods are delivered if so requested by
a. The 1000 bags of rice were delivered to the warehouseman.
the Warehouse Company by a merchant, and
a negotiable receipt was issued therefore. (1988)
The rice cannot thereafter, while in a. Mr. Tigas would have preference over the
possession of the Warehouse Company, be goods covered by the negotiable warehouse
attached by garnishment or otherwise, or be receipt (assuming that there was proper
levied upon under an execution unless the negotiation to him). In negotiation, the
receipt be first surrendered to the transferee’s rights over the goods vests from
warehouseman, or its negotiation enjoined. the very moment of transfer and the
The Warehouse Company cannot be transferee thereupon acquires the direct
compelled to deliver the actual possession of obligation of the warehouseman to hold the
the rice until the receipt is surrendered to it goods for him.
or impounded by the court. b. Mr. Tapang, in this case, would have
preference over the goods since the
b. Yes. The rice mill, as a holder for value of transferee of a non-negotiable warehouse
the receipt, has a better right to the rice than receipt merely acquires (1) rights no better
the creditor. It is rice mill that can surrender than those of the transferor and (2) the
the receipt which is in its possession and can direct obligation of the warehouseman only
comply with the other requirements which upon notice to him of the transfer.
will oblige the warehouseman to deliver the
rice, namely, to sign a receipt for the delivery (1998)
of the rice, and to pay the warehouseman’s 1. A bill of lading may be defined as a written
lien and fees and other charges. acknowledgement of the receipt of goods
and an agreement to transport and to deliver
(1998 Bar) them at a specified place to a person named
There was a valid negotiable receipt as there therein or on his order.
was a valid delivery of 200 cavans of rice for
deposit. In such case, the warehouseman 2. A bill of lading has a two-fold character,
(LWC) is not obliged to deliver the 200 namely, a) it is a receipt of the goods to be
cavans of rice deposited to any person, transported; and b) it constitutes a contract
except to one who can comply with Section 8 of carriage of the goods.
of the Warehouse Receipts law, namely:
(1) surrender the receipt of which he is a (1992)
holder;
(2) willing to sign a receipt for the delivery of
the goods; and
(3) pays the warehouseman’s liens, that is,
his fees and advances, if any.
(1993 Bar)
1. B has a better right than S. The right of the
unpaid seller, S, to the goods was defeated
by the act of A in endorsing the receipt to B.
2. The warehouseman can be obliged to
deliver the palay to A if B negotiates back the
receipt to A. In that case, A becomes a holder
again of the receipt, and A can comply with
Sec. 8 of the Warehouse Receipts Law.
(1992 Bar)
The pledgor should bear the loss. In the
pledge of a warehouse receipt the ownership
of the goods remain with depositor or his
transferee. Any contract of real security,
among them a pledge, does not amount to or
result in an assumption of risk of loss by the
creditor. The Warehouse Receipts Law did
not deviate from this rule.
(1991 Bar)
The warehouseman is bound to deliver the
goods upon demand made either by the
holder of the receipt for the goods or by the
depositor if the demand is accompanied by
(a) an offer to satisfy the warehouseman’s
lien,
 LOAN
(1993, 1996, 1998, 2001, 2004, 2005, 2016
BAR) (computing legal interest)
1. When the obligation is breached and it
consists in the payment of sum of money like
a loan or forbearance of money, in the
absence of stipulation, the rate of interest
shall be the legal rate of 6% per annum, (Art.
2209, CC) which was increased to 12% per
NB Circular No. 905, series of 1982 to be
computed from default. The twelve percent
(12%) per annum legal interest shall apply
only until June 30, 2013. From July 1, 2013,
the new rate of six percent (6%) per annum
shall be the prevailing rate of interest when
applicable. (Nacar v. Gallery Frames, 703
SCRA 439 [2013], applying BSP-MB Circular
No. 799)

2. The interest on the amount of damages

awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No
interest, however, shall be adjudged on
unliquidated claims or damages, exept when
or until the demand can be established with
reasonable uncertainty. Accordingly, where
the demand is established with reasonable
certainty, the interest shall begin to run from
the time the claim is made judicially or extra-
judicially, but when such certainty cannot be
so reasonably established at the time the
demand is made, the interest shall begin to
run only from the date the judgment of the
court is made (at which time the
quantification of damages may be deemed to
have been reasonably ascertained). The
actual base for the computation of legal
interest shall, in any case, be on the amount
finally adjudged. (Nacar v. Gallery Frames,
703 SCRA 439 [2013])
 COMMODATUM
(1993)
1) The contract is called "commodatum".
[Art. 1933. Civil Code)
2) No, B is not obliged to pay A for the use of
the passenger Jeepney because
commodatum Is essentially gratuitous. (Art.
1933. Civil Code]
3) Yes, because B devoted the thing to a
purpose different from that for which it has
been loaned (Art. 1942, par. 2, Civil Code)
Alternative Answer:
No, because an obligation which consists in
the delivery of a determinate thing shall be
extinguished if it should be lost or destroyed
without the fault of the debtor, and before
he has incurred in delay. (Art. 1262. Civil
Code)
(1977)
Differentiate mutuum from commodatum.
In mutuum, the object is money or any
consumable (fungible) thing; in
commodatum, the object is, as a general
rule, a non-consumable (non-fungible) thing.
The former may or may not be gratuitous;
the latter is essentially gratuitous.
The purpose of the former is consumption;
the purpose of the latter is use. In the
former, ownership passes to the debtor; in
the latter, ownership remains with the bailor.
In the former, the debtor must pay or return
an equal amount of the same kind or quality;
in the latter, the bailee must return the
specific thing loaned.
(1998)
Distinguish usufruct from commodatum and
state whether these may be constituted over
consumable goods.
1. Usufruct is a right given to a person
(usufructuary) to enjoy the property of
another with the obligation of preserving its
form and substance.
On the other hand, commodatum is a
contract by which one of the parties (bailor)
delivers to another (bailee) something not
consumable so that the latter may use it for
a certain time and return it.
In usufruct the usufructuary gets the right to
the use and to the fruits of the same, while in
commodatum, the bailee only acquires the
use of the thing loaned but not its fruits.
Usufruct may be constituted on the whole or
a part of the fruits of the thing. (Art. 564.
Civil Code). It may even be constituted over
consumables like money (Alunan v. Veloso,
52 Phil. 545). On the other hand, in
commodatum, consumable goods may be
subject thereof only when the purpose of the
contract is not the consumption of the
object, as when it is merely for exhibition.
(1983)
The bailee in a commodatum is liable for the
loss of the thing loaned even if thru a
fortuitous event where, being able to save it
or his own thing, he chose to save the latter.
(1990)
1) The contract is called "commodatum".
[Art. 1933. Civil Code). COMMODATUM is a
contract by which one of the parties (bailor)
delivers to another (bailee) something not
consumable so that the latter may use it for
a certain time and return it
2) No, B is not obliged to pay A for the use of
the passenger Jeepney because
commodatum is essentially gratuitous. (Art.
1933. Civil Code
3) Yes, because B devoted the thing to a
purpose different from that for which it has
been loaned (Art. 1942, par. 2, Civil Code)
(2005)
A. Tito must bear the P15,000.00 expenses
for the van. Generally, extraordinary
expenses for the preservation of the thing
loaned are paid by the bailor, he being the
owner of the thing loaned. In this case
however, Tito should bear the expenses
because he incurred the expenses without
first informing Pedro about it. Neither was
the repair shown to be urgent. Under Article
1949 of the Civil Code, bailor generally bears
the extraordinary expenses for the
preservation of the thing and should refund
the said expenses if made by the bailee;
Provided, The bailee brings the same to the
attention of the bailor before incurring them,
except only if the repair is urgent that reply
cannot be awaited.
ALTERNATIVE ANSWER:
The P15,000.00 spent for the repair of the
van should be borne by Pedro. Where the
bailor delivers to the bailee a non-
consummable thing so that the latter may
use it for a certain time and return the
identical thing, the contract perfected is a
Contract of Commodatum. (Art. 1933, Civil
Code) The bailor shall refund the
extraordinary expenses during the contract
for the preservation of the thing loaned
provided the bailee brings the same to the
knowledge of the bailor before incurring the
same, except when they are so urgent that
the reply to the notification cannot be
awaited without danger. (Art. 1949 of the
Civil Code)
In the given problem, Pedro left his
Adventure van with Tito so that the latter
could use it for one year while he was in
Riyadh. There was no mention of a
consideration. Thus, the contract perfected
was commodatum. The amount of
P15,000.00 was spent by Tito to tune up the
van and to repair its brakes. Such expenses
are extra-ordinary expenses because they
are necessary for the preservation of the van
Thus, the same should be borne by the
bailor, Pedro.
contract is not the consumption of the
B. Tito must also pay for the ordinary object, as when it is merely for exhibition.
expenses for the use and preservation of the (Art. 1936, Civil Code)
thing loaned. He must pay for the gasoline,
oil, greasing and spraying. He cannot ask for (1998)
reimbursement because he has the Usufruct is a right given to a person
obligation to return the identical thing to the (usufructuary) to enjoy the property of
bailor. Under Article 1941 of the Civil Code, another with the obligation of preserving its
the bailee is obliged to pay for the ordinary form and substance. (Art. 562, Civil Code)
expenses for the use and preservation of the
thing loaned. On the other hand, commodatum is a
contract by which one of the parties (bailor)
C. No, Pedro does not have the right to delivers to another (bailee) something not
retrieve the van before the lapse of one year. consumable so that the latter may use it for
The parties are mutually bound by the terms a certain time and return it.
of the contract. Under the Civil Code, there
are only 3 instances when the bailor could In usufruct the usufructuary gets the right to
validly ask for the return of the thing loaned the use and to the fruits of the same, while in
even before the expiration of the period. commodatum, the bailee only acquires the
These are when: (1) a precarium contract use of the thing loaned but not its fruits.
was entered (Article 1947); (2) if the bailor
urgently needs the thing (Article 1946); and Usufruct may be constituted on the whole or
(3) if the bailee commits acts of ingratitude a part of the fruits of the thing. (Art. 564,
(Article 1948). Not one of the situations is Civil Code) It may even be constituted over
present in this case. consumables like money (Alunan v. Veloso,
52 Phil. 545). On the other hand, in
The fact that Tito had leased the thing loaned commodatum, consumable goods may be
to Annabelle would not justify the demand subject thereof only when the purpose of the
for the return of the thing loaned before contract is not the consumption of the
expiration of the period. Under Article 1942 object, as when it is merely for exhibition.
of the Civil Code, leasing of the thing loaned (Art. 1936, Civil Code)
to a third person not member of the
household of the bailee, will only entitle
bailor to hold bailee liable for the loss of the
thing loaned.
D. Generally, extraordinary expenses arising
on the occasion of the actual use of the thing
loaned by the bailee, even if incurred
without fault of the bailee, shall be
shouldered equally by the bailor and the
bailee. (Art. 1949 of the Civil Code).
However, if Pedro had an urgent need for the
vehicle, Tito would be in delay for failure to
immediately return the same, then Tito
would be held liable for the extraordinary
expenses.
(1998)
1. USUFRUCT is a right given to a person
(usufructuary) to enjoy the property of
another with the obligation of preserving its
form and substance. (Art. 562. Civil Code)
On the other hand, COMMODATUM is a
contract by which one of the parties (bailor)
delivers to another (bailee) something not
consumable so that the latter may use it for
a certain time and return it.
In usufruct the usufructuary gets the right to
the use and to the fruits of the same, while in
commodatum, the bailee only acquires the
use of the thing loaned but not its fruits.
Usufruct may be constituted on the whole or
a part of the fruits of the thing. (Art. 564.
Civil Code). It may even be constituted over
consumables like money (Alunan v. Veloso,
52 Phil. 545). On the other hand, in
commodatum, consumable goods may be
subject thereof only when the purpose of the
 MUTUUM
(1975)
Yes, the creditor can recover the principal
together with legal interest thereon from the
date of demand (Art. 2209), and legal
interest on the interests paid in excess of the
lawful rate from the date of payment (Art.
1413),
The usurious interest, that is to say, the
whole usurious interest can not be
recovered, because of Article 1413 of the
Civil Code and Section 6 of the Usury Law.
However, the illegality of the stipulation
concerning the usurious interests does not
affect the creditor's right to recover the
principal, inasmuch as a contract of loan with
usurious interest is a divisible contract. The
illegal terms can be separated from the legal
ones
(2001)
The action will prosper. While it is true that
the interest ceilings set by the Usury Law are
no longer in force, it has been held that PD
No. 1684 and CB Circular No. 905 merely
allow contracting parties to stipulate freely
on any adjustment in the interest rate on a
loan or forbearance of money but do not
authorize a unilateral increase of the interest
rate by one party without the other's
consent (PNB v. CA, 238 SCRA 2O [1994]]).
To say otherwise will violate the principle of
mutuality of contracts under Article 1308 of
she Civil Code. To be valid, therefore, any
change of interest must be mutually agreed
upon by the parties (Dizon v, Magsaysay, 57
SCRA 25O [1974]). In the present problem,
the debtor not having given his consent to
the increase in interest, the increase is void.
on any adjustment in the interest rate on a
loan or forbearance of money but do not
authorize a unilateral increase of the interest
rate by one party without the other's
consent (PNB v. CA, 238 SCRA 2O [1994]]). To
say otherwise will violate the principle of
mutuality of contracts under Article 1308 of
the Civil Code. To be valid, therefore, any
change of interest must be mutually agreed
upon by the parties (Dizon v, Magsaysay, 57
SCRA 25O [1974]). In the present problem,
the debtor not having given his consent to
the increase in interest, the increase is void.
(2004)
OB's action is not just and valid. The debtor
cannot be required to pay the increase in
interest there being no law authorizing it, as
stipulated in the contract. Increasing the rate
in the absence of such law violates the
principle of mutuality of contracts
(2012)
No, Art. 1956, Civil Code, provides that “no
interest shall be due unless it has been
expressly stipulated in writing.”
Yes, Solutio Indebiti is applicable because
Villanueva Overpaid by P600,000.00
representing interest payment which is not
due. He can, therefore, demand its return.

(2002)
With respect to the collection of money or
promissory note, it being a forbearance of
money, the legal rate of interest for having
defaulted on the payment of 12% will apply.
With respect to the damages to the painting,
it is 6% from the time of the final demand up
to the time of finality of judgment until
judgment credit is fully paid. The court
considers the latter as a forbearance of
money.

(2004)
In MUTUUM, the object borrowed must be a
consumable thing the ownership of which is
transferred to the borrower who incurs the
obligation to return the same consumable to
the lender in an equal amount, and of the
same kind and quality. In COMMODATUM,
the object borrowed is usually a non-
consumable thing the ownership of which is
not transferred to the borrower who incurs
the obligation to return the very thing to the
lender.

(2001)
The action will prosper. While it is true that
the interest ceilings set by the Usury Law are
no longer in force, it has been held that PD
No. 1684 and CB Circular No. 905 merely
allow contracting parties to stipulate freely
 DEPOSIT
(1987)
If the depository by force majeure loses the
thing and receives money or another thing in
its place, he shall deliver the sum or other
thing to be depositor. There being no
showing that there was anything received in
place of the things deposited, the Alto Bank
is not liable for the contents of the safety
box.
(1992)
B would have no right to claim the money.
Article 1990 of the Civil Code is not
applicable. The law refers to another thing
received in substitution of the object
deposited and is predicated upon something
exchanged.
The Mayor of Manila cannot invoke. Article
719 of the Civil Code which requires the
finder to deposit the thing with the Mayor
only when the previous possessor is
unknown.
In this case , a must return the bag of money
to the bank as the previous possessor and
known owner (Arts. 719 and 1990. Civil Code.
Code are present. In the case of Gullas v. PNB
(62 Phil. 519), The Supreme Court held: “The
Civil Code contains provisions regarding
compensation (set off) and deposit. These
portions of Philippine Law provide that
compensation shall take place when two
persons are reciprocally creditor and debtor
of each other. In this connection, it has been
held that the relation existing between a
depositor and a bank is that of creditor and
debtor. xxx As a general rule, a bank has a
right of set off of the deposits in its hands for
the payment of any indebtedness to it on the
part of a depositor.” Hence, compensation
took place between the mutual obligations
of X and Y Bank.
(1997)
Yes, he can recover the deficiency. The
action of AB to go after the surety bond
cannot be taken to mean a waiver of his right
to demand payment for the whole debt. The
amount received from the surety is only
payment pro tanto, and an action may be
maintained for a deficiency debt.

(1997)
We submit that there is no pactum
commissorium here. Deposits of money in
banks and similar institutions are governed
by the provisions on simple loans (Art. 1980.
Civil Code). The relationship between the
depositor and a bank is one of creditor and
debtor. Basically this is a matter of
compensation as all the elements of
compensation are present in this case.

(1992)
B would have no right to claim the money.
Article 1990 of the Civil Code is not
applicable. The law refers to another thing
received in substitution of the object
deposited and is predicated upon something
exchanged.

The Mayor of Manila cannot invoke. Article

719 of the Civil Code which requires the
finder to deposit the thing with the Mayor
only when the previous possessor is
unknown.

In this case , a must return the bag of money

to the bank as the previous possessor and
known owner (Arts. 719 and 1990. Civil
Code.)

(1997, 1998 BAR) (encashed the deposit)

There is no pactum commissorium here.
Deposits of money in banks and similar
institutions are governed by the provisions
on simple loans (Art. 1980). The relationship
between the depositor and a bank is one of
creditor and debtor. Basically this is a matter
of compensation as all the elements of
compensation are present in this case .

(1998)
Y Bank is correct. Art. 1287, Civil Code, does
not apply. All the requisites of Art. 1279, Civil
 SURETY
(1975)
No, the surety is not entitled to recover the
deficiency. Article 2115 of the Civil Code
provides that in the foreclosure of a pledge,
if the price of the sale is less than the
indebtedness secured by the pledge, the
creditor shall not be entitled to recover the
deficiency, notwithstanding any stipulation
to the contrary. By electing to sell the articles
pledged, the creditor waived any other
remedy, and must abide by the results of the
sale. No deficiency is recoverable.

(1997)
Yes, he can recover the deficiency. The
action of AB to go after the surety bond
cannot be taken to mean a waiver of his right
to demand payment for the whole debt, The
amount received from the surety is only
payment pro tanto, and an action may be
maintained for a deficiency debt.
 GUARANTY
(2009)
FALSE. An oral contract of guaranty, being a
special promise to answer for the debt of
another, is unenforceable unless in writing
(Article 1403 [2] b, NCC ).

ALTERNATIVE ANSWER:
TRUE. An oral promise of guaranty is valid
and binding. While the contract is valid,
however ,it is unenforceable because it is not
writing . Being a special promise answer for
the debt, or miscarriage of another, the
Statute of Frauds requires it to be in writing
to be enforceable ( Article 1403 [2] b,
NCC).The validity of the contract should be
distinguished from its enforceability .

(2010)
Guaranty and Suretyship distinguished
(1) The obligation in guaranty is secondary;
whereas, in suretyship, it is primary.

(2) In guranty, the undertaking is to pay if the

principal debtor cannot pay; whereas, in
suretyship, the undertaking is to pay if the
principal debtor does not pay .

(3)In guranty, the guarantor is entitled to the

benefit of excussion; whereas, in suretyship
the surety is not entitled.

(4) Liability in guaranty depends upon an

independent agreement to pay the
obligations of the principal if he fails to do
so; whereas, in suretyship, the surety
assumes liability as a regular party.

(5) The Guarantor insures the solvency of the

principal debtor; whereas, the surety insures
the debt

(6) In a guaranty, the guarantor is subsidiarlty

liable; whereas, in a suretyship, the surety
binds himself solidarity with the principal
debtor (Art 2047, Civil Code).
 ANTICHRESIS
(1995)
1. A contract of antichresis was entered into
between Olivia and Peter. Under Article 2132
of the New Civil Code, by a contract of
antichresis the creditor acquires the right to
receive the fruits of an immovable of his
debtor, with the obligation to apply them to
the payment of the Interest, and thereafter
to the principal of his credit.
In mortgage the fruits are not applied to the
principal obligation.
2, In antichresis, the creditor is in possession.
In mortgage, the debtor is in possession.
3. The principal and interest must be in
writing for validity. In mortgage, registration
is required to bind third persons.
4, In antichresis, the creditor pays the taxes.
In mortgage, taxes are not imposed on the
creditor.

2. Peter must pay taxes and charges upon

the land and bear the necessary expenses for
preservation and repair which he may deduct
from the fruits. (Art, 2135, NCC)

3. The amount of the principal and interest

must be specified in writing, otherwise the
antichresis will be void. (Art. 2134, NCC)

4. No. Art. 2136 specifically provides that the

debtor cannot re-acquire the enjoyment of
the immovable without first having totally
paid what he owes the creditor. However, it
is potestative on the part of the creditor to
do so in order to exempt him from his
obligation under Art. 2135, NCC, The debtor
cannot re-acquire the enjoyment unless
Peter compels Olivia to enter again the
enjoyment of the property.

(1989)
Antichresis is a contract whereby the creditor
acquires the right to receive the fruits of an
immovable of his debtor with the obligation
to apply them to the payment of interest if
owing and thereafter to the principal.

Pledge is an accessory and real contract

whereby the debtor delivers to the creditor
movable property as security for the
performance of a principal obligation upon
the fulfillment of which the thing pledged
shall be returned to the debtor.

A real estate mortgage is an accessory

contract whereby the debtor guarantees the
performance of the principal obligation by
subjecting real property or real right as
security for the performance of such
obligation.

By the contract of antichresis the creditor

acquires the right to receive the fruits of an
immovable of his debtor, with the obligation
to apply them to the payment of the interest,
if owing, and thereafter to the principal of his
credit.
Antichresis distinguished from pledge;
1. Antichresis is consensual, pledge is a real
contract,
2. Antichresis involves real property, pledge
involves personal property.
3. In antichresis, the principal and the
interest must be provided in writing for
validity. In pledge, the date and description
of the pledge must be in a public instrument
to affect third persons.
Antichresis distinguished from mortgage;
1, In antichresis the fruits that are applied to
the interest and thereafter to the principal.
 CHATTEL MORTGAGE
(1995)
Assuming that the aircraft was sold for P1
Million, there is no order of preference. The
P1 Million will all go to the bank as a chattel
mortgagee because a chattel mortgage
under Art. 2241 (4) NCC. defeats Art. 2244
(12) and (14}. Art. 2241 (3) and (5) are not
applicable because the aircraft is no longer In
the possession of the creditor.
(1999)
In a contract of chattel mortgage possession
belongs to the creditor, while in a contract of
pledge possession belongs to the debtor.
A chattel mortgage is a formal contract while
a pledge is a real contract.
A contract of chattel mortgage must be
recorded in a public instrument to bind third
persons while a contract of pledge must be in
a public instrument containing description of
the thing pledged and the date thereof to
bind third persons.
(1977)
The debtor F bears the loss of the sugar.
Although the sugar was constructively
delivered by F to W, it was only a security for
the payment of the debt. The ownership of
the sugar remained with F. By reason of the
principle of res perit domino, the owner F
should bear the loss.
(1999)
(c) No, Y would not become the owner of the
land. The stipulation is in the nature of
pactum commissorium which is prohibited by
law. The property should be sold at public
auction and the proceeds thereof applied to
the indebtedness. Any excess shall be given
to the mortgagor.
(d) No, the answer would not be the same.
This is a valid stipulation and does not
constitute pactum commissorium. In pactum
commissorium, the acquisition is automatic
without need of any further action. In the
instant problem another act is required to be
performed, namely, the conveyance of the
property as payment (dacion en pago).
(2001)
1) The assignment was a mortgage, not a
cession, of the leasehold rights. A cession
would have transferred ownership to the
bank. However, the grant of authority to the
bank to sell the leasehold rights in case of
default is proof that no such ownership was
transferred and that a mere encumbrance
was constituted. There would have been no
need for such authority had there been a
cession.
2) No, the clause in question is not a pactum
commissorium. It is pactum commissorium
when default in the payment of the loan
automatically vests ownership of the
encumbered property in the bank. In the
problem given, the bank does not
automatically become owner of the property
upon default of the mortgagor. The bank has
to sell the property and apply the proceeds
to the indebtedness.
(1985)
1. With regard to the real estate mortgage, B
can foreclose the same because it includes
future loans. But with regard to the chattel
mortgage, B cannot foreclose because of the
affidavit of good faith which requires that it
be a just and valid debt, and, therefore, the
chattel mortgage can not cover future loans.
2. The mortgage is indivisible and therefore it
answers for both debts. Therefore, both
mortgages can be foreclosed.
(1989)
(1) Distinguish between a contract of real
estate mortgage and a contract of sale with
right of repurchase.
1. Real estate mortgage is an accessory
contract. A contract of sale with right of
repurchase is a principal contract.
2. Real estate mortgage involves no transfer
of title. A contract of sale involves a
conditional transfer of title.
3. Real estate mortgage involves no transfer
of possession. A contract of sale involves a
conditional transfer of possession.
4. In a real estate mortgage the creditor has
no rights to the fruits. In a contract of sale,
the vendee is entitled to the fruits.
5. In a real estate mortgage, upon default the
creditor is not the owner. In a contract of
sale, upon consolidation, the vendee is the
owner.
(1999)
The equity of redemption is different from
the right of redemption. Equity of
redemption is the right of the mortgagor
after judgment in a judicial foreclosure to
redeem the property by paying to the court
the amount of the judgment debt before the
sale or confirmation of the sale. On the other
hand, right of redemption is the right of the
mortgagor to redeem the property sold at an
extra-judicial foreclosure by paying to the
buyer in the foreclosure sale the amount
paid by the buyer within one year from such
sale.
(1991)
The complaint for the annulment of
Catalino’s Title will prosper. In the first place,
the second owner’s copy of the title secured
by him form the Land Registration Court is
void ab initio, the owner’s copy thereof
having never been lost let alone the fact that
said second owner’s copy of the title was
fraudulently procured and improvidently
issued by the Court. In the second place, the
Transfer Certificate of Title procured by
Catalino is equally null and void, it having
been issued on the basis of a simulated or
forged Deed of Sale. A forged deed is an
absolute nullity and conveys no title.
The mortgage in favor of Desiderio is likewise
null and void because the mortgagor is not
the owner of the mortgaged property. While mortgage, it is not bound by it, as far as the
it may be true that under the “Mirror Bank is concerned, the chattel mortgage,
Principle” of the Torrens System of Land does not exist. Moreover, the chattel
Registration, a buyer or mortgagee has the mortgage does not exist. Moreover, the
right to rely on what appears on the chattel mortgage is void because it was not
Certificate of Title, and in the absence of registered. Assuming that it is valid, it does
anything to excite suspicion, is under no not bind the Bank because it was not
obligation to look beyond the certificate and annotated on the title of the land mortgaged
investigate the mortgagor’s title, this rule to the bank. Z cannot demand that the Bank
does not find application in the case at hand pay him the loan Z extended to X, because
because here, Catalino’s title suffers from the Bank was not privy to such loan
two fatal infirmities, namely: transaction.
1. The fact that it emanated from a forged
deed of a simulated sale;
2. The fact that it was derived from a
fraudulently procured or improvidently
issued second owner’s copy, the real owner’s
copy being still intact and in the possession
of the true owner, Bruce.
The mortgage to Desiderio should be
cancelled without prejudice to his right to go
after Catalino and/or the government for
compensation from the assurance fund.
(1999)
In a contract of CHATTEL MORTGAGE
possession belongs to the creditor, while in a
contract of PLEDGE possession belongs to
the debtor.
A chattel mortgage is a formal contract while
a pledge is a real contract.
A contract of chattel mortgage must be
recorded in a public instrument to bind third
persons while a contract of pledge must be in
a public instrument containing description of
the thing pledged and the date thereof to
bind third persons.
(1999)
The equity of redemption is different from
the right of redemption. EQUITY OF
REDEMPTION is the right of the mortgagor
after judgment in a judicial foreclosure
proceedings, within a period of not less than
90 days, before the sale or confirmation of
the sale, to pay into the court the amount of
the judgment debt. On the other hand,
RIGHT OF REDEMPTION is the right of the
mortgagor, after the sale of the mortgaged
property, to redeem the property by paying
to the purchaser in the sale or for him to the
sheriff who made the sale, the amount paid
by him, with interest, within one year from
the sale. There is no right of redemption,
only equity of redemption, in a judicial
foreclosure under the Rules of Court.
(1994, 2003)
No, Z’s demand is not valid. A building is
immovable or real property whether it is
erected by the owner of the land, by a
usufructuary, or by a lessee. It may be
treated as a movable by the parties to
chattel mortgage but such is binding only
between them and not on third parties
(Evangelista v. Alto Surety Col, Inc., G.R. No.
L-11139, April 23, 1958). In this case, since
the bank is not a party to the chattel
 PLEDGE
(1986)
The C.C. on pledge provides that the
foreclosure of the pledge extinguishes the
principal obligation, whether the proceeds of
the sale are more, or less than the obligation.
Hence,
a) Matunod cannot recover the deficiency.
b) Matunod is entitled to keep the excess,
unless there is a stipulation to the contrary.
c) if it is a chattel mortgage, Matunod can
still recover the deficiency as there is no
prohibition in the Chattel Mortgage Law
similar to pledge and the excess, if any
should be returned to the mortgagor
(Maganaka),
(1989)
Answer:
Debtor/pledgor is not entitled to the excess
unless the contrary is agreed upon. The
offspring shall pertain to the pledgor but is
subject to the pledge if there is no stipulation
to the contrary.
(1994)
No. Bilateral contracts cannot be changed
unilaterally. A pledge is only a subsidiary
contract, and Steve Is still indebted to Danny
for the amount of P400,000.00 despite the
fall in the value of the stocks pledged.
b) No. Danny's right as pledgee is to sell the
pledged shares at a public sale and keep the
proceeds as collateral for the loan. There is
no showing that the fall in the value of the
pledged property was attributable to the
pledger's fault or fraud. On the contrary, the
economic crisis was the culprit. Had the
pledgee been deceived as to the substance
or quality of the pledged shares of stock, he
would have had the right to claim another
thing In their place or to the immediate
payment of the obligation. This is not the
case here.
(1979)
The action will prosper. It is submitted that
the 400 heads of New Zealand cows were
pledged by DL to T & Co. in order to secure
the payment of the loan of P200,000.00. As
an adjunct of the accessory contract of
pledge, the parties also agreed that the cows
shall be kept at the ranch of T & Co. for
pasture, that the personnel of the latter shall
take care of them, and that for these
services, the latter shall be entitled to one-
half of the offspring. Unfortunately, they all
died without the fault of anybody. Now,
what is the effect of the loss? Since the loss
was due to a fortuitous event, it is clear that
both the accessory contract of pledge and
the corollary contract of services are totally
extinguished. The principal contract of loan,
however, still subsists. As a matter of fact,
the obligation of DL to pay the loan plus
interest has become immediately
demandable.
(1996)
There is no pledge because only movable by itself, but not of the land which the title
property may be pledged (Art. 2094. NCC). If represents.
at all, there was a pledge of the paper or
document constituting the Torrens Title, as a There is no mortgage because no deed or
movable by itself, but not of the land which contract was executed in the manner
the title represents. There is no mortgage required by law for a mortgage (Arts. 2085 to
because no deed or contract was executed in 2092, NCC; 2124 to 2131, NCC).
the manner required by law for a mortgage
(Arts. 2085 to 2092, NCC; 2124 to 2131, There is no contract of antichresis because
NCC). There is no contract of antichresis no right to the fruits of the property was
because no right to the fruits of the property given to the creditor (Art. 2132 NCC).
was given to the creditor (Art. 2132 NCC).
A contract of simple loan was entered into A contract of simple loan was entered into
with security arrangement agreed upon by with security arrangement agreed upon by
the parties which is not one of those the parties which is not one of those
mentioned above, mentioned above.
Alternative Answer: (2009)
There is a contract of mortgage constituted a. The contract is valid because Rosario has
over the land. There is no particular form to execute a document in favor of Jennifer to
required for the validity of a mortgage of real transfer the ownership of the pledged ring to
property. It is not covered by the statute of the latter. The contract does not amount to
frauds in Art. 1403, NCC and even assuming pactum commissorium because it does not
that it is covered, the delivery of the title to provide for the automatic appropriation by
the creditor has taken it out of the coverage the pledgee of the thing pledged in case of
thereof. A contract of mortgage of real default by the pledger.
property Is consensual and is binding on the
parties despite absence of writing. However, B. No, my answer will be different. While the
third parties are not bound because of the contract of pledge is valid, the stipulation
absence of a written instrument evidencing authorizing the pledgee to immediately sell
the mortgage and, therefore the absence of the thing pledged is void under Art 2088 of
registration. But this does not affect the the New Civil Code, which provides that “the
validity of the mortgage between the parties creditor cannot appropriate the things given
(Art. 2125, NCC), The creditor may compel by way of pledge or mortgage, or dispose of
the debtor to execute the mortgage in a them xxx.” Jennifer cannot immediately sell
public document in order to allow its by herself the thing pledged. It must be
registration (Art. 1357.NCC in relation to Art. foreclosed by selling it at a public auction in
1358. NCC). accordance with the procedure under Art
2112 of the New Civil Code.
(1984)
No. Under the agreement with A, B is
authorized to use the car. The creditor may
use the thing pledged with the consent of
the owner (Art. 2104). A period for the
payment of the obligation was also
stipulated. Under Article 1196, it is presumed
that whenever a period is designated, it is
presumed to have been established for the
benefit of both the creditors and the debtor.
Hence, A cannot prepay the loan and
demand the return of the pledged property
until the term had arrived.
(2004)
The shares of stock cannot be deemed
owned by ABC upon default of MNO. They
have to be foreclosed. Under Article 2088 of
the Civil Code, the creditor cannot
appropriate the things given by way of
pledge. And even if the parties have
stipulated that ABC becomes the owner of
the shares in case MNO defaults on the loan,
such stipulation is void for being a pactum
commissorium.
(1996)
None of the above. There is no pledge
because only movable property may be
pledged (Art. 2094. NCC). If at all, there was a
pledge of the paper or document
constituting the Torrens Title, as a movable
 QUASI CONTRACTS
(1989)
A. An implied contract requires consent of
the parties. A quasi-contract is not
predicated on consent, being a unilateral act.
B. The basis of an implied contract is the will
of the parties. The basis of a quasi-contract is
law to the end that there be no unjust
situation.
(1985)
) 1. B and C are solidarity liable for the losses.
They are so bound under the law on
negotiorum gestio and must comply with the
duties of a gestor in good faith.
2. B and C are only jointly liable because the
assumption of the negotiorum gestio was not
to avoid an imminent danger.
3. The law on negotiorum gestio which
should apply, renders an officious manager,
who delegates to another person all or some
of his duties, liable for the acts of the
delegate. The nature of their liability is
solidary. (Art. 2146).
(1992)
a) The juridical relation is that of the quasi-
contract of "negotiorum gestio". Y
is the "gestor" or "officious manager" and X
is the "owner" (Art. 2144, Civil Code).
(b) Y must render an account of his
operations and deliver to X the price he
received for the sale of the harvested fish
(Art, 2145, Civil Code).
(c) X must pay the loan obtained by Y from W
because X must answer for obligations
contracted with third persons in the interest
of the owner (Art. 2150, Civil Code),
(d) Express ratification by X provides the
effects of an express agency and X is liable to
pay the commissions habitually received by
the gestor as manager (Art. 2149, Civil Code).
(1993)
No. B is not liable for damages, because he is
a gestor in negotiorum gestio (Art. 2144, Civil
Code)
Furthermore, B Is not liable to A because
Article 2147 of the Civil Code is not
applicable.
B did not undertake risky operations which
the owner was not accustomed to embark
upon:
a) he has not preferred his own interest to
that of the owner;
b) he has not failed to return the property or
business after demand by the owner; and
c) he has not assumed the management in
bad faith. Alternative Answer; He would be
liable under Art. 2147 (1) of the Civil Code,
because he used the property for an
operation which the operator is not
accustomed to, and in so doing, he exposed
the house to increased risk, namely the
operation of a pension house on the second
floor and stores on the first floor.
(1995)
1. Negotiorum gestio existed between
Amparo and Armando, She voluntarily took
charge of the agency or management of the
business or property of her uncle without
any power from her uncle whose property
was neglected. She is called the gestor
negotiorum or officious manager, (Art. 2144,
NCC)
2. It is recommended by the Committee that
an enumeration of any two (2) obligations
and two (2) rights as enumerated in Arts.
2145 to 2152, NCC, would entitle the
examinee to full credit.
Art. 2145. The officious manager shall
perform his duties with all the diligence of a
good father of a family, and pay the damages
which through his fault or negligence may be
suffered by the owner of the property or
business under management.
The courts may. however. Increase or
moderate the indemnity according to the
circumstances of each case.
Art. 2146. If the officious manager delegates
to another person all or some of his duties,
he shall be liable for the acts of the delegate,
without prejudice to the direct obligation of
the latter toward the owner of the business.
The responsibility of two or more officious
managers shall be solidary, unless
management was assumed to save the thing
or business from imminent danger.
Art. 2147. The officious manager shall be
liable for any fortuitous event:
(1) If he undertakes risky operations which
the owner was not accustomed to embark
upon;
(2) If he has preferred his own interest to
that of the owner;
(3) If he fails to return the property or
business after demand by the owner, (4) If he
assumed the management in bad faith.
Art. 2148. Except when the management was
assumed to save the property or business
from imminent danger, the officious
manager shall be liable for fortuitous events
(1) If he is manifestly unfit to carry on the
management;
(2) If by his Intervention h e prevented a
more competent person from taking up the
management.
Art. 2149. The ratification of the
management by the owner of the business
produces the effects of an express agency,
even if the business may not have been
successful.
Art. 2150, Although the officious
management may not have been expressly
ratified, the owner of the property or
business who enjoys the advantages of the
same shall be liable for obligations incurred
in his interest, and shall reimburse the
officious manager for the necessary and
useful expenses and for the damages which
the latter may have suffered in the
performance of his duties.
The same obligation shall be incumbent upon
him when the management had for its
purpose the prevention of an imminent and
manifest loss, although no benefit may have
been derived.
Art. 2151. Even though the owner did not
derive any benefit and there has been no
imminent and manifest danger to the
property or business, the owner is liable as
under the first paragraph of the preceding
article, provided:
(1) The officious manager has acted in good
faith, and
(2) The property or business is Intact, ready
to be returned to the owner. Art. 2152. The
officious manager is personally liable for
contracts which he has entered into with
third persons, even though he acted in the
name of the owner, and there shall be no
right of action between the owner and third
persons. These provisions shall not apply:
(1) If the owner has expressly or tacitly
ratified the management, or
(2) When the contract refers to things
pertaining to the owner of the business,
(NOTE: It is recommended by the Committee
that an enumeration of any two (2)
obligations and any two (2) rights as
enumerated la Arts. 2145 to 2152, NCC
would entitle the examinee to full credit.)
(1976)
Yes, he is bound to pay the reasonable value
thereof on the basis of quasi- contract.
Article 1474, provides that where the price
has not been fixed by the parties and the
thing or any part thereof has been delivered
to an appropriate buyer, he must pay a
reasonable price therefore. What is a
reasonable price is a question of fact
dependent on the circumstances of each
particular case.
(2004) (1980)
(a) Yes, the Bank is entitled to recover the
$4,500 from "D". We have in this case an
example of a quasi-contract of solutio
indebiti which arises whenever a person
unduly delivers a thing through mistake to
another who has no right to demand it (Art
2154, Civil Code). Its requisites are:
(1) There mast be a payment or delivery
made by one person to another; (2) The
person who made the payment or delivery
was under no obligation To do so; and
(3) The payment or delivery was made by
reason of mistake.
It is obvious that the above requisites are
present in the instant case.
(1997)
Solutio indebiti refers to the juridical relation
which arises whenever a person unduly
delivers a thing through mistake to another
who has no right to demand it (Art. 2154,
Civil Code),
Negotiorum gestio refers to the juridical
relation which arises when a person
voluntarily takes charge of the agency or
management of the business or property of
another, without any power from the latter,
as a consequence of which he is obliged to
continue the same until the termination of
the affair and its incidents, or to require tile
person concerned to substitute him, if the
owner is in a position to do go (Art. 2144,
Civil Code),
(2004)
There was error in the amount of change
given by RRA. This is a case of solutio indebiti
in that DPO received something that is not
due him. He has the obligation to return the
P100.00; otherwise, he will unjustly enrich
himself at the expense of RRA. (Art. 2154,
Civil Code)
(1992)
He would be liable under Art. 2147 (1),
because he used the property for an
operation which the operator is not
accustomed to, and in so doing, he exposed
the house to increased risk, namely the
operation of a pension house on the second
floor and stores on the first floor. (nasunog)
(2004)
There was error in the amount of change
given by RRA. This is a case of solution
indebiti in that DPO received something that
is not due him. He has the obligation to
return the P100.00; otherwise, he will
unjustly enrich himself at the expense of RRA
(Art. 2154).