LAW ON CREDIT TRANSACTIONS

Obligations and rights of pledgor and pledgee

1. What is the obligation of the pledgee when the pledge earns or produces fruits, income, dividends, or
interests? To compensate them with those which owing to him, or insofar as the amount mayexceed that
which is due, he shall apply it to the principal;
2. The creditor is not entitled to recover any deficiency in case the price of sale of the thing pledged is less
than the amount due, what is the reason? To compel creditor to hold an honest public sale;
3. If there is danger of destruction, impairment, or diminution in value of the thing pledged, what is the duty
of the pledgee without fault? He may cause the same to be sold at a public sale;
4. Which of the following cannot be secured by a pledge or mortgage? None of the above.
5. All movables which are within commerce may be pledged, provided they are susceptible of possession,
which of the following cannot be pledged? none of the above.

negotiable instruments and documents; bonds and shares of stock; warehouse receipts and bills of lading;

6. An obligation of the pledgor: to reimburse the pledgee for expenses made for its preservation;
7. A borrowed from B P50, 000. An offered his specific ring by way of pledge. It was expressly stipulated that
upon non-payment of the debt on time, the ring would be belong to B. This forfeiture clause, which has
ring would traditionally not been allowed is called a Pacto commisorium
8. Effect of sale on the thing pledged if it is less than the principal obligation. Creditor cannot recover the
deficiency even if there is stipulation.
9. An obligation of the pledgee: to answer for the loss of the thing pledged in case of negligence;
10. Mr. Borrowie pledged his SMC bond with a face value of P100,000.00 to secure his loan from Mr. Lendy in
the amount of P50,000.00. The bond was due on January 30, 2013 while the loan is due on February 3,
2013. In this case the bond becomes due before it is redeemed, which of the following statements is
correct? Mr. Lendy may collect and receive the amount due from the bond and apply the same to the
payment of his claim and deliver the surplus to Mr. Borrowie;