• Andrea/GUARANTOR

• Cha/ EDITOR
• Rogie/ IN A CONTRACT OF PLEDGE
• Earl/ CREDITOR/ PLEDGEE
• Ralph/ DEBTOR/ PLEDGOR
• Relle/ DEBTOR
• Soph/ EXAMPLE OF A CONTRACT OF PLEDGE/ REAL ESTATE MORTGAGE
AND REQUISITES
• Ana/ RIGHTS OF CREDITOR/ To further appreciate the concept of Real Estate
Mortgage: The following is an example...
• Pat/ CHARACTERISTICS OF PLEDGE
• Grospe/ TWO CONTRACTS OF GUARANTY HANGGANG EXAMPLE
• Ica/ STATED UNDER ARTICLE 2047.. HANGGANG THREE PARTIES IN A
CONTRACT OF GUARANTY/ Characteristics of Chattel Mortgage
• Kyla/ NARRATOR
• Cella/ OBLIGATIONS OF THE DEBTOR
• Aljon/ACTOR
• Raquel/ THE RIGHTS OF DEBTOR IN A PLEDGE/ To further appreciate the
concept of Chattel Mortgage hanggang EXAMPLE OF CHATTEL MORTGAGE
• Resa/ KINDS OF PLEDGE
GUARANTY AND PLEDGE

Stated under Article 2047, By guaranty, 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.

THREE PARTIES IN A CONTRACT OF GUARANTY

1. Guarantor, who gives the guaranty
2. Principal Debtor, in respect of whose default the guarantee is given.
3. Creditor, to whom the guaranty is given

ICA

TWO CONTRACTS OF GUANRANTY (GROSPE)

▪ The principal contract between the principal debtor and creditor
▪ The secondary contract between the creditor and the surety
 -to further understand the concept of guaranty the following is an example

EXAMPLE OF A CONTRACT OF GUARANTY (GROSPE)

Relle wants to have a loan to Pearl. Due to some financial difficulties in the past, he
had defaulted on his previous loan. Now, Relle’s business is going smoothly and he
wants a loan for expansion. Due to his past records, Pearl is quite hesitant to lend him
the money. A common acquaintance, Andrea stands as a Guarantor. Andrea told Earl
that she is sure that this time Relle will pay the loan.

In this situation, the guarantor is Andrea, the creditor is Pearl and the principal
debtor is Relle. If Relle would not be able to pay Pearl, then, Andrea will be liable to pay
the amount of loan to Pearl.

SCENE 1
Kausap ni Earl si Andrea, nagkukwento tungkol sa ex niya HAHAHAHAHAHA joke
basta nag uusap. Then suddenly tatawag si Relle.
--insert ringtone---
Pearl: maarteng boses please, hey mars wait for me okay? I just pick this call, Hello
Relle, what do you need huh?
Relle: Hello Pearl, can I borrow you a money? I just needed it for my business
expansion. I will pay you right away. Just lend me 50,000 if that’s okay with you?
Pearl: Hmmmm *thinking maarte* I will update you; I’ll just need to check my money
okay?
Relle: Okay, I hope you can lend me money it’s really a big help for me. Bye
Andrea: Hey is that Relle? What does he want?
Pearl: He wanted to borrow money but I am hesitant to lend him you know, past
issues duh
Andrea: Oh, someone is being judger hay, that was all in the past, I assure you this
time he will pay you
Pearl: Wow really? How sure are you huh?
Andrea:-- naglabas ng maraming pera, I will pay you, look at my money it so
madami right, Just lend him.
 Pearl: Wow, so rich *attitude* Okay I will lend him money, just in case he wouldn’t
pay me, you will be accountable marsy.
DANCE--- IT REALLY HURTS----

In a contract of pledge, it specifies what is due, property that shall be used as a

pledge, and conditions for satisfying the debt or obligation. The property can be in
the pledgee's actual possession, meaning physical possession. Then, it can be in
the constructive possession of the pledgee, meaning that the he has some control
over the property, which typically occurs when actual possession is impossible.
(ROGIE)

CHARACTERISTICS OF PLEDGE (PAT)

✓ Accessory
✓ Real
✓ Indivisible
✓ Unilateral
✓ Subsidiary- non-fulfilment of principal obligation, things may be alienated for
payment to the creditor
✓ Ownership retained by debtor- unless thing is expropriated

KINDS OF PLEDGE (RESA)

✓ Conventional – created by the will of the parties
✓ Legal (stated under Articles. 546, 1731 and 1994)

- To further understand the contract of pledge the following is an example

EXAMPLE OF A CONTRACT OF PLEDGE (Rafaela Pledgor AND Pearl Pledgee)

Rafaela is indebted to Pearl and secured by the pledge of a laptop. The laptop is
delivered to Pearl, but in the public instrument executed, there is no description of
laptop as well as the date of pledge does not appear in the instrument.
If Rafaela sells the laptop to Andrea, does Andrea have to respect the pledge in favor of
Pearl?
✓ No, because as to Andrea, the pledge is ineffective. To be valid, it must appear in
a public instrument, unless she already had an actual knowledge of the pledge.
(SOPH)

Scene 2 (Ralph and Earl)

Rafaela *thinking* - Omg I still have utang to Pearl maarte facial expression, the laptop I
gave him is intended for Andrea because I promised to sell her that one, once I got
mine. What should I do now? ---okay mamaya papasok si Pearl
Rafaela: Hello Pearl? Can I ask you a favor? Would you mind returning the laptop? I will
pay you my debt as soon as I receive my whole monthly salary promise.
Pearl *snob ka muna gorl Hey Rafaela (malaking voice dito lang) you are so abusado
ha. You think you can easily convince me huh? Just pay me and right away I will deliver
the laptop in your house. Good bye *snob ulit*
Disappointed sayaw one time *insert it really hurts pwede sayaw sila both tas pop up
yung laptop na clipart sa screen HAHAHAHHAHAHAHAHHA

THE RIGHTS OF DEBTOR IN A PLEDGE (RAQUEL)

✓ Alienation
✓ Judicial or extra-judicial deposit
✓ Continue ownership
✓ Required to be deposited with a third person
✓ Demand its return upon offering of another
OBLIGATIONS OF THE DEBTOR (CELLA)
- Pay the debt and its interest (Art. 2105)
- Pay damages that the pledgee may suffer by reason of the flaws of the thing
pledged (Arts. 1951, 1201)
RIGHTS OF CREDITOR (ANA)
✓ Retain possession of the thing pledged)
✓ Demand reimbursement for its preservation
✓ Bring actions which pertain to the owner
✓ Usage (Art. 2104)
✓ If he is deceived of its substance:
o Claim another
o Demand immediate payment (Art. 2109)
o Collect and receive the amount due if it is a credit (Art. 2118)
 o Sell it upon default of the debtor (Arts. 2087, 2112

Kyla: As stated in section 3 of Act. No. 1508, A chattel mortgage is a conditional sale of
personal property as security for the payment of a debt, or the performance of some
other obligation specified therein, 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.
Meaning: It is a personal property or a moveable property that is recorded in chattel
mortgage register as security for the performance of an obligation.

Characteristics of Chattel Mortgage: (ICA)

• It is an accessory contract because it secures performance of principal obligation.
• It is a formal contract because it requires registration in the Chattel Mortgage Register
for its validity.
• It is unilateral contract because it produces only obligation in the part of the creditor to
free the thing from the encumbrance or fulfillment of the obligation.
• The excess of proceeds of the sale goes to the debtor
• Creditor can recover deficiency from the debtor/mortgagor, except if covered by Recto
law.

To further appreciate the concept of Chattel Mortgage:

EXAMPLE OF CHATTEL MORTGAGE (RAQUEL)
Aljon wants to buy a car however he doesn't have enough money to purchase it.
Therefore, he seeks help from her rich friend Patricia. Who willing to finance the car that
Aljon wants purchase if both of them agree to enter into Chattel Mortgage? Aljon then
agrees with it and constitutes a contract of a chattel mortgage. Wherein he will be
indebted Php 300,000.00 to Patricia and he will pay it for 5 years installment basis.
However, during the third year, Aljon failed to pay the principal obligation. Thus, a
foreclosure happens 30 days after the nonpayment of the obligation. The car then
enters into a public auction, and Patricia gives notice to Aljon and the province or
municipality 10 days before the sale of the car. The car then is sold however it's than
the actual price.

First scene:
Patricia: Did you prepare the chattel mortgage contract?

Aljon: Yes, I email it to you already.

Patricia: Okay, I will check my email. The file name is Chattel Mortgage Contract, right?

Aljon: Yes, you can read it first before we submit the registration to the Chattel
Mortgage Register here in our province. But to assure you, all the things that we agreed
upon are put there in contract suchlike Php 300,000.00 purchased cost of the car that I
will pay to you on five years installment basis.

Patricia: (nodded) okay, I think we don't have any problem then. So, tomorrow I'll help
you to purchase the car, and then we will submit or register the contract at the chattel
mortgage register. Is that okay with you? And by the way, can we also make an affidavit
of good faith?

Aljon: Yeah sure. My wife can act as our witness.

Second scene:
Narrator Kyla: Three years later on the third year of the installment payment. Aljon was
unable to pay the Php 60,000.00. installment payment to Patricia. Therefore, Patricia
gives Aljon 30 days to pay the third-year installment payment however there's no
rendering of obligation happens.

Patricia:--masungit na expression--- Hello! Aljon just reminding you that you didn't
deposit Php 60,000.00 on my bank account. It's been two days but up until now, you're
not paying your obligation.

Aljon: I'm sorry Patricia but can you please give me a couple of days to pay the Php
60,000.00?

Patricia: Hmm. Since we're friends, I'll give you a 30 days extension to pay the Php
60,000.00. However, if until then you unable to pay your obligation. I have no choice but
to put the car in a public auction.

Aljon: I understand. Thank you so much for your consideration. I'll assure you to pay the
Php 60,000.00 as soon as possible promise *crossed fingers*.

Third scence:
Kyla: Aljon unable to pay his obligation during the 30 days extension. Therefore, Patricia
doesn't have a choice but to put the car in a public auction.

Patricia: I am Sorry Aljon, but I already put the car in the public auction and 10 days
from now the car will be sold for foreclosure. I also send you formal email about that,
and I already notify the municipality about the public auction.

Aljon: I understand Ms. Patricia. You don't have to apologize.

(INSERT IT REALLY HURTS DANCE ALJON)

Fourth Scene:
Kyla: The car was purchase in the public auction but it constitutes a deficit. Could it be
that Ms. Patricia recovers deficiency from Aljon?

Answer: As abovementioned in the characteristics of Chattel Mortgage the

creditor/mortgagee can recover the deficiency from the debtor/mortgagor, except if
covered by Recto law.

However, if the car was sold more than the actual price. The excess of proceeds of the
sale goes to the debtor/mortgagor.

Real Estate Mortgage

Cortez : Real estate mortgage is a contract whereby the debtor secures to the creditor
the fulfillment of a principal obligation, specially subjecting to such security immovable
property or real rights over immovable property in case the principal obligation is not
complied with at the time stipulated
According to Art. 2085 of the Civil Code of the Philippines, the essential requisites of
real estate mortgage are to:
1. Secures the fulfillment of a principal obligation;
2. Mortgagor, must be the absolute owner of the thing mortgaged; and
3. Mortgagor must have free disposal of their property, or be legally authorized for such
purpose.

Dimabuyu: To further appreciate the concept of Real Estate Mortgage:

The following is an example...

On 30th of December 2017, Angelica and Kathleen enter into a contract of real estate
mortgage. Wherein Angelica will put her parcel of land worth Php 300,000.00 as
collateral for the Php 300,000.00 money that she will borrow to Kathleen. This
constitutes with the payment term of Php 55,000.00 that will be equally payable in every
30th of December for six years. Both of the parties agreed on the said stipulations as
they register the contract to the Registry of Property. However, during the third year of
the contract, Anglica lost her work. Thus, she's unable to pay the Php 55,000.00
obligation. Kathleen then give Angelica grace period of one month to pay the Php
55,000.00. However, no payment of obligation happened. Therefore, Kathleen file a
complaint for judicial foreclosure. The court then finds the claim of Kathleen is valid.
First Scene:
Kathleen: How much money do you want to borrow?

Angelica: Php 300,000.00 if that's okay with you?

Kathleen: Php 300,000.00? That's a big amount? Do you have anything that will
guarantee me in lending you the money?

Angelica: I am willing to put my parcel of land worth Php 300,000.00 as collateral.

Kathleen: That's good to hear! Let's now make a formal agreement about this matter.

Second scene:
Dimabuyu: Three years later in the third year of the installment payment. Angelica was
unable to pay the Php 55,000.00. installment payment to Kathleen. Therefore, Kathleen
gives Angelica 30 days extension however there's no rendering of obligation happens.

Kathleen: Hello! Angelica, I just want to inform you that I already filed a complaint in the
regional trial court of Pampanga. For the foreclosure of the parcel of land that you enter
in our contract as collateral. And they granted me to foreclose the parcel of land.

Angelica: Is that so! Then I'll redeem my parcel of land.

Third Scene:
Dimabuyu: The question is: Could Angelica redeem the parcel of land?

The Answer is Yes. Under Rule 68 of the Rules of Court, the Mortgagor can exercise
the Equity of Redemption wherein he/she can still redeem the mortgaged property. In
the period of either 90 to 120-day from entry of judgment or as long as it is before the
confirmation of the sale. It applies to judicial foreclosure of real mortgage and chattel
mortgage foreclosure.