CREDIT TRANSACTIONS

1. Which of the following statements is not correct?

An agreement to constitute a commodatum is binding and is perfected from the moment
there is meeting of minds
a. An agreement to constitute a commodatum is binding and is perfected from the
moment there is meeting of the minds
b. Fixed, savings, and current deposits of money in barks and similar institutions shall
be governed by the provisions concerning mutuum
c. Precarium is a kind of commodatum where the bailor may demand the thing loaned
at will
d. In case of extraordinary expenses, the debtor in mutuum will shoulder 50% if he is
in actual use of the thing borrowed.
Answer: D

2. Atoy uses a savings account with a bank. The contract between Atoy and the bank is
one of
a. Agency c. Deposit
b. Commodatum d. Mutuum
Answer: D

3. The following debts cannot be compensated, except:

a. Contract arising from contract of depositum.
b. Contract arising from contract of commodatum.
c. Contract arising from contract' of support.
d. Contract arising from contract mutuum.
Answer: D

4. Essential elements of pledge, except

a. Pledgor is the absolute owner of the thing pledged.
b. The person constituting the pledge has the free disposal of his property or if he
is an agent or representative, that he is legally authorized
c. The thing pledged must be placed in the possession of the creditor or of a 3rd
person by common agreement
d. To bind third persons there must be an affidavit of good faith
Answer: D
5. The following are essential to a contract of pledge and mortgage, except:
a. That they be constituted to secure the fulfillment of a principal obligation
b. That the pledgor or mortgagor be the absolute owner of the thing pledged at the
time the obligation to deliver the same arises.
c. That the persons constituting the pledge of mortgage have the free disposal of
their property, and in the absence thereof, that they be legally authorized for
the purpose.
d. None of the above
Answer: B

6. In which of the following accessory contracts is delivery a requirement for perfection?

a. Pledge
b. Real Estate Mortgage
c. Chattel Mortgage
d. None of the above
Answer: A

7. Possession of the thing pledged must be placed in the hands of

a. PIedgee
b. Surety
c. Guarantor
d. Pledgor
Answer: A

8. Which of the following is true and correct?

a. Unless otherwise agreed upon by the parties, the sale of the mortgaged properly
extinguishes in full the obligation of the mortgagor to the mortgagee.
b. Pledge and mortgage are considered principal contracts.
c. When the obligation is secured by a pledge or mortgage and it is to paid when due,
the pledgee or mortgagee may dispose the collateral even if there is no agreement
to that effect between the parties.
d. In both pledge and mortgage, the creditor is entitled to deficiency judgement
Answer: C
9. By specific provisions of law, which of the following need not appear in a public
instrument?
a. A contract of donation involving an immovable
b. A contribution to the partnership of immovable property or real rights.
c. A pledge, describing the thing pledged and the date of the pledge, in order to be
effective against third persons.
d. A contract of agency, for the sale of a piece of land or any interest therein, in order
consider the sale by the agent as valid.
Answer: C

10. A depositor has three separate single bank accounts with PIM, P2M and P3M,
balance respectively, in the same bank which is closed by
BSP. How much is the maximum insured amount by PDIC from these deposits?
a. P 500,000
b. B.1,000,000
c. P 1,500,000
d. P6,000,000
Answer: A

11. What is the definition of the term insured deposit?

a. It means the amount due to any bonafide depositor for Inpisimate deposits in an
insured bank as of the date of closure but not to exceed Five hundred thousand
pesos (P500.000,00)
b. It means the amount due to any bonafide depositor for illegitimate deposits in an
insured bank as of the date of closure but not to exceed Five hundred hundred
pesos (P500,000.00).
c. It means the amount due to my bonafide depositor for legitimate deposits in an
insured bank as of the date of closure but not to exceed on million thousand pesos
(P1,000,000,00)
d. It means the amount due to any bonafide depositor for illegitimate deposits in an
insured bank of the date of closure but not to exceed one million pesos
(1,000,000.00).
Answer: A

12. A, upon request, loaned his passenger jeepney to B to enable B to bring his sick wife
from Legaspi to the PGH in Manila for treatment. On the way back to Legaspi, after
leaving his wife at the hospital, stopped the passenger jeepney. B stopped for them and
allowed them to ride on board accepting from them just as in the case of ordinary
passenger jeepney plying their route. As B was crossing there was an onrush of lahar
from Mount Mayon. The jeep that was loaned to him was destroyed the following is
incorrect?
a. The contract between A and B is called commodatum
b. Bis obliged to pay A for the use of the passenger jeepney
c. B is liable for the loss of the jeepney
d. A can recover from B the value of the jeepney and payment for the use of the
jeepney
Answer: B

13. Harlequin and: Diane, members of the Seven Deadly Sins, borrowed P100,000 from
Meliodas, their Captain. To secure the payment of the loan,
Harlequin gave his spear Chastiefol and Diane gave her war hammer Gideon by way of
pledge. On maturity date, Harlequin paid P50,000 to Meliodas. In this case,
A. Meliodas cannot be compelled to return the Chastiefol
B. Harlequin can demand the return of his Chastiefol
C. If the Chastiefol is returned to Harlequin, the loan will be extinguished D. Diane can
demand the return of her Gideon
Answer: A

14. Legendairy Corporation (LC) borrowed money from Goliath Bank (GB) in the amount
of P100M. To secure the payment of the loan, 'LC executed a real estate mortgage over
its two parcels of land. On due date, LC failed to pay, and GB caused the extrajudicial
foreclosure of the 'mortgage. How long is the redemption period, if any?
a. Three months from the foreclosure sale or until registration of the sale, whichever
is earlier
b. Three months from the foreclosure sale
c. One year from the foreclosure sale
d. Ninety days to one hundred twenty days from the foreclosure sale or until a judicial
order of confirmation of the sale
Answer: A

15. Teddy pledged her diamond ring to secure her debt to Bobbie amounting to P20,000.
Teddy was not able to pay the said debt on due date and Bobbie caused the foreclosure
of the pledge. In this case, which of the following is false?
a. The foreclosure sale will be conducted by a notary public.
b. If the ring sold for P25,000, Teddy would be entitled to the excess if there is
stipulation to that effect
 c. If the ring sold for P18,000, Bobbie would be entitled to the deficiency if there is
stipulation to that effect
d. Whether or not the ring was sold for more or less than the amount of the loan, the
loan shall be extinguished.
Answer: C

16. A, an illiterate, borrowed P100,000' from B. Aside from that, A mortgaged his land to
B which the latter accepted to secure the payment of the loan. B prepared a deed of sale
with right to repurchase of the land at a price of P100,000 which A signed after B
explained that such document evidenced their agreement. What is the proper legal
remedy available to A?
a. Action for reformation of instrument
b. Action for rescission of contract
c. Action for annulment of contract
d. Action for declaration of nullity of contract
Answer: B

17. A borrowed P100,000 from B. The loan was secured by a mortgage of A's land in
favor of B. Without the knowledge of A, C paid B the sum of P100,000 for A's debt. As a
result
a. C cannot claim reimbursement from A inasmuch as the payment was made without
the knowledge of A
b. C is entitled to get reimbursement from A but did not acquire the right to foreclose
the mortgage
c. The obligation of A to B was extinguished and A should reimburse C the amount
of P100,000 otherwise C can. foreclose the mortgage
d. C can recover the amount from A because there is legal subrogation
Answer: B

18. A borrowed P1,000,000 from B and C who acted as solidary creditors. When the loan
matured, B wrote a letter to A demanding payment of the loan directly to him. Before A
could comply, C went to see him personally. to collect and he paid him. Did A make a
valid payment?
a. No, since A should have split the payment between B and c:
b. No, since B, the other solidary creditor, already made a prior. demand for payment
from A
c. Yes, since the payment covers the whole obligation
d. Yes, since: C solidary creditor, payment to him extinguished the obligation
Answer: B
19. Which of the following obligations may be subject to LEGAL COMPENSATION?
a. Obligation of depositary in a contract of deposit
b. Obligation of bailee in a contract of commodatum
c. Obligation arising from crime or delict
d. Obligation arising from contract of loan or mutuum
Answer: D

20. The loan of movable or Immovable things, but not the fruit
a. Mutuum
b. Delegacion
c. Expromission
d. Commodatum
Answer: D

21. Commodatum as distinguished from mutuum

a. Object is money or consumable or fungible thing
b. Ownership is transferred to the borrower
c. Object or thing loaned must be returned by the borrower
d. Maybe gratuitous or onerous
ANSWER: C

22. Ownership is retained despite delivery, except

a. Commodatum
b. Mutuum
c. Universal Partnership of Profits
d. On trial or satisfaction
ANSWER: B

23. The disposal of the property subject to this accessory contract cannot be prohibited
by the creditor-pledgee/mortgagee:
a. Pledge
b. Chattel Mortgage
c. Real Estate Mortgage
d. None of the above
Answer: B
24. Possession of the thing pledged must be placed in the hands of
a. PIedgee
b. Surety
c. Guarantor
d. Pledgor
Answer: A

25. Mark Paul pledged his laptop to Mark John for P10,000.00. Mark Paul was unable to
pay the obligation 60 days after due date. Mark John sold the laptop at public auction for
P7,500.00. Which of the following is correct?
a. The deficiency of P2,500.00 can be recovered
b. The deficiency of P2,500,00 can be recovered even if a contrary stipulation
appears
c. The deficiency of P2,500.00 can be recovered if stipulated
d. The deficiency of P2,500.00 cannot be even if there is a stipulation that she can.
Answer: D

26. A borrowed P1000 from B as evidenced by a negotiable promissory note. In order to

secure the fulfilment of the obligation, A pledged and delivered his specific watch in B. At
the date of maturity of the obligation, B voluntarily returned the specific watch to A. Which
is CORRECT?
a. Only the contract of loan in extinguished.
b. Only the contract of pledge is extinguished
c. Both contract of loan and contract of pledge are extinguished.
d. Neither contract of loan nor contract of pledge are extinguished.
Answer: B

27. A, B and Care partners in ABC Pawnshop Partnership. A customer borrowed P10,000
from ABC Partnership and then pledged his specific watch as collateral. A obtained from
the storage cabinet of the Pawnshop the said pledged watch without the knowledge of B
and Cand used it in a party. During the party, the said pledged watch was stolen by a thief
from A. Upon demand of the customer for damages, who shall be liable?
a. Partner A only because he used the watch without the knowledge of Partner B and
Partner C
b. Partner A and ABC Partnership only, solidarity
c. Partner A, Partner B. Partner C and ABC Partnership, solidarity
d. ABC Partnership then Partner A, Partner B and Partner C, subsidiarity.
Answer: C

28. D borrowed 3,000 from C. In order to secure the fulfillment of the contract of loan, D
pledged and delivered his specific laptop to C as collateral for his obligation. At the
maturity date of the loan, D defaulted in the payment of the obligation. At the maturity
date of the loan, D and C voluntarily agreed that the said laptop shall be used as full
settlement of the secured loan. Which is CORRECT?
a. The said agreement is pactum commissorium and therefore null and void.
b. Ownership of the laptop was ncquired by C and the contract of loan is fully
extinguished by dación en pago.
c. Ownership of the laptop was acquired by C by reason of pactum commissorium.
d. The contract of loan is extinguished only if the value of the laptop is equal to the
amount of the loan.
Answer: B

29. Which of the following contracts is perfected by the delivery of the subject matter of
the contract?
a. Contract of sale
b. Contract of partnership
c. Contract of pledge
d. Contract of real estate mortgage
Answer: C

30. P borrowed P1,000 from C. P pledged and delivered his specific cellphone to C as
collateral for the loan. The contract pledge provides that C may recover the deficiency as
a result of foreclosure sale. P failed to pay his obligation at the maturity date which
prompted C to sell the pledged cellphone at public auction. The cellphone was sold at a
price of P900. Which of the following statements is CORRECT?
a. The contract of pledge is extinguished but the contract of loan is extinguished up
to P900 only,
b. Pledgee P may still recover the deficiency of P100 because there is stipulation to
that effect.
c. The contract of pledge is not extinguished.
d. Both contract of pledge and contract of loan are extinguished by the public sale.
Answer: D
31. D, E, A and R are partners in DEAR Company with D as manager: T owes DEAR
Company P5,500 and D, in D's personal capacity, P4,500. T's debt to D is secured by a
pledge of her diamond ring. Both debts are already due. T pays P4,500 to D and tells her
that the same is in payment of her debt to D. Thus, D issues her own personal receipt.
Which is CORRECT?
a. The payment of P4,500 will be applied to the partnership credit at P2,475 and to
D's credit at P2,025.
b. The payment will be applied entirely to D's credit.
c. The payment will be applied as follows: P5,500 to partnership and the balance to
D in the amount of P1,000.
d. T, D and DEAR Company will have to agree as to which credit the payment shall
apply.
Answer: B

32. Which statements are TRUE?

a. The sale, lease, exchange, mortgage, pledge or other disposition of all or
substantially all of the corporate property require the vote of majority of the board
of directors or trustees, and 2/3 of the outstanding capital stock or 2/3 of the
members.
b. The board of directors or trustees may abandon the sale or other disposition of all
or substantially all of the corporate property without further approval from the
stockholders or members.
c. Both A and B
d. Neither A nor B
Answer: C

33. A borrowed P10,000 from B with G serving as guarantor and P serving as pledgor of
his laptop. At the date of maturity of the loan, G remitted in writing the guaranty of G.
Which is CORRECT?
a. The contract of loan is extinguished.
b. The contract of pledge is extinguished.
c. The contract of guaranty cannot be extinguished by remission.
d. Both contracts of loan and pledge are not extinguished.
ANSWER: B
34. A and B borrowed P10,000 from C. In order to secure the debt, A pledged his
cellphone worth P5,000 to C while B pledged his laptop worth P5,000 to C. At the maturity
date of the loan, A paid P5,000 to C. Which is CORRECT?
a. A may ask for the return of the laptop.
b. B. A may ask for the return of the cellphone.
c. C. The contract of loan is fully extinguished.
d. D. Neither A nor B may ask for the return of cellphone or laptop.
ANSWER: D

35. A, a minor sold his ring to B for P4,000. Later, B borrowed P6,000 from C and as
security pledged the ring to C. B failed to pay C and the latter foreclosed the pledge, sold
it at public auction for P5,000 to X. As a result
a. The title of B is not valid, therefore the pledge of the ring to C is also not valid
because in pledge the pledgor must be the owner
b. The deficiency of P1,000 cannot be recovered by C from B
c. The deficiency of P1,000 can be recovered if there is a stipulation to that effect
d. If X is in bad faith (X has knowledge that A, the original owner is a minor) ownership
will not pass to B
ANSWER: B

36. The following may be objects of contract of pledge, except

a. Shares of stocks
b. Pieces of jewelry
c. An agricultural land
d. A negotiable bill of exchange
ANSWER: C

37. Which of the following statements is not correct?

a. If the thing pledged will be returned by the pledgee, the contract of pledge is
extinguished
b. Unlawful partnership is void ab initio
c. Any stipulation allowing the pledgee or mortgagee to appropriate the thing pledged
or mortgaged is void
d. In case the creditor foreclosed the chattel mortgage, he cannot recover any
deficiency in case the proceeds of the foreclosure sale are less than the unpaid
obligation
ANSWER: D
38. A pledged his watch to B for P20,000. A failed t pay his obligation. B sold it at public
auction for P18,000. Can B recover the deficiency?
a. Yes, even without stipulation
b. Yes, if there is stipulation
c. No, even if there is stipulation
d. No, unless there is stipulation
ANSWER: C

39. A owes B P500 and as security, A pledged his diamond ring. Later A borrowed again
P200. As a result
a. The debtor is entitled to excess of the proceeds if stipulated
b. The debtor shall not be entitled to the excess of the proceeds
c. The creditor is not entitled to the excess of the proceeds
d. The creditor cannot recover any deficiency
ANSWER: B

40. Should there be a reasonable ground to fear the destruction or impairment of the thing
pledged, without the fault of the pledgee, what is the obligation of the pledgee and what
then is the right of the pledge
First Answer – the pledgee is bound to advice the pledgor, without delay of the danger to
the thing pledged
Second Answer – The pledgor can demand the return of the thing pledged upon offering
another thing in pledge which is the same kind as the former and not of inferior quality.
a. True, True
b. True, False
c. False, True
d. False, False
ANSWER: A

41. A contract of pledge is

A. A real contract because it is perfected by the delivery of the thing pledged
B. An accessory contract because it has no independent existence of its own
a. Only A
b. Only B
c. Both A and B
d. Neither A nor B
ANSWER: C

42. Which of the following statements is not correct?

a. The sale of the thing pledged shall extinguish the principal obligation, whether or
not the proceeds of the sale are equal to the amount of the principal obligation,
interest, and expenses in a proper case
b. If the price of the sale of the thing pledged is more than the obligation, the debtor
shall not be entitled to the excess unless it is otherwise agreed
c. If the price of the thing pledged is less than the obligation, the creditor shall not be
entitled to recover the deficiency, unless it is otherwise agreed
d. As the public auction, the pledgor or owner may bid and he shall have a better right
if he should offer the same terms as the highest bidder
ANSWER: C

43. The following are essential requisites common to the contract of pledge and
mortgage, except,
a. That they are constituted to secure the fulfillment of a principal obligation
b. That the pledgor or mortgage is the absolute owner of the thing pledged or
mortgaged
c. That the contract is registered with the Register of Deeds
d. That the person constituting the contract has free disposed of his property or that
he is authorized legally for the purpose
ANSWER: C

44. A pledged her ring to F to secure a P10,000 obligation payable in two years. One year
thereafter, F gives note in willing to A stating that the debt need not be secured and that
A may get the ring back at her most convenient time. As a result
a. The principal obligation and the contract of pledge are both extinguished
b. Only the principal obligation is extinguished but not the contract of pledge because
A did not get back the ring
c. Both the principal obligation and the contract of pledge are not extinguished
because A did not get back the ring
d. The pledge is extinguished and F is constituted as depository
ANSWER: D
45. L pledged his shares of stock to M to secure his obligation. Latter, L sold his shares
to J. As a result,
a. L can compel M to surrender the shares certificate to J
b. J can compel M to deliver the shares certificate to him
c. The refusal of M to surrender the shares certificate will invalidate the sale
d. M can refuse to surrender the shares certificates
ANSWER: D

46. The creditor cannot appropriate the thing pledged or mortgaged, or disposed of
them. Any stipulation to the contract is void
The contract of pledge or mortgage may secure all kinds of obligation be they
pure or subject to a suspensive or resolutory condition
a. True, True
b. True, False
c. False, True
d. False, False
ANSWER: A

47. A pledge his Toyota car to B for a loan of P1M. A was unable to pay the loan and
therefore B sold the car in a public auction but it was sold only for P.5M. Can B recover
the deficiency from A?
a. No, he cannot recover the deficiency in the absence of contrary stipulation.
b. No, he cannot even if there is an agreement that he can.
c. Yes, he can even in the absence of stipulation allowing him.
d. Yes, he can provide it was agreed upon by the parties.
Answer: A

48. A and B agreed on a contract of pledge. However, they entered into a contract of
mortgage in the honest belief that the mortgage and pledge are the same. The instrument
may be reformed:
a. No, the document cannot be reformed since the contract is void.
b. No, it cannot be changed. They are bound by the document which speaks for itself.
c. Yes, it can be reformed because it does not express the true agreement of the
parties.
d. No, it cannot be reformed because there was no meeting of minds between the
parties and the remedy is annulment of contract.
Answer: D
49. D is indebted to C in the amount of P200,000 and delivers to c his diamond ring by
way of pledge. If D sells the same diamond ring to T, when will T acquire ownership of
the same?
a. From the time the sale is perfected between D and T
b. From the time T pays the price to D
c. From the time C consents to the sale between D and T
d. From the time T obtains actual possession of the diamond ring
Answer: C

50. Antichresis must be in writing and involves only immovables.

In pledge and Recto Law there is no deficiency liability.
a. False, false
b. True, true
c. False, true
d. True, false
Answer: B

51. The following even if not in public instrument are valid, binding, and enforceable,
except:
a. Negotiable instruments
b. Sale of land, either by the owner or agent with written authority
c. Agency, pledge, mortgage
d. Partnership contract wherein immovables are contributed
Answer: D

52. S sold to B a car on installment wherein the latter mortgaged the same car as security
for the price. Failing to pay the installments, the mortgage on the car was foreclosed. Is
B still liable for any deficiency if the seller fails to recover in the foreclosure sale?
a. Yes, because it is only in case of pledge is the debtor not liable for any deficiency.
b. Yes, if so stipulated upon by the parties.
c. No, unless agreed upon by the parties.
d. No, notwithstanding any stipulation to the contrary.
Answer: D

53. Based on the preceding case, suppose it was a pledge, would the debtor/pledgor be
liable for the deficiency?
a. No, notwithstanding stipulation to the contrary.
 b. No, unless otherwise stipulated.
c. Yes, if so agreed upon.
d. Yes, even in the absence of stipulation.
Answer: A

54. D owes C a sum of money with M as mortgagor of his land to secure the loan. Is the
mortgage valid even if the mortgagor is not the debtor?
a. Yes, provided the mortgagor or pledgor in case of pledge is the absolute owner of
the property mortgaged or pledged.
b. Yes, provided it is in writing and registered.
c. No, the mortgagor/pledgor must be the debtor himself.
d. No, unless the mortgagor is a co-debtor.
Answer: A

55. A, the registered stockholder of 1,000 shares in ABC Corp., pledged the shares to B
by endorsement in blank of the covering stock certificates and execution of a Dee of
Assignment of Shares of Stock, intended as collateral for a loan of Php1-M that was also
supported by a separate promissory note. Under these facts, is there a valid pledge of
the shares of stock?
a. No, because shares of stock are intangible personal properties whose possession
cannot be delivered and, hence, cannot be the subject of a pledge.
b. No, because the pledge of shares of stock requires double registration with the
Register of Deeds of the principal place of business of the corporation and of the
residence of the pledgor.
c. Yes, because endorsement and delivery of the certificates of stock is equivalent to
the transfer of possession of the covered shares to the pledge.
d. Yes, because the execution of the Deed of Assignment of Shares of stock is
equivalent to a lawful pledge of the shares of stock.
Answer: C

56. (1) In conventional pledge, there is no deficiency liability on the part of the pledgor
inspite of stipulation to the contrary.
(2) In legal pledge, the excess of the proceeds of the sale after foreclosure shall
pertain to the pledgor even in the absence of stipulation.
a. Both statements are false
b. Both are true
c. First is false, second is true
d. First is true, second is false
Answer: B

57. A and B agreed on a contract of pledge. However, they entered into a contract of
mortgage in the honest belief that the mortgage and pledge are the same. The instrument
may be reformed:
a. No, the document cannot be reformed since the contract is void.
b. No, it cannot be changed. They are bound by the document which speaks for itself.
c. Yes, it can be reformed because it does not express the true agreement of the
parties.
d. Not, it cannot be reformed because there was no meeting of minds between the
parties and the remedy s annulment of contract
Answer: D

58. The following is an example of a real contract

a. Contract of pledge
b. Contract of deposit
c. Contract of commodatum
d. All of the above
e. None of the above
Answer: D

59. In case of shares owned in common by two or more stockholders, the consent of
either is enough to vote the same. The pledgee or mortgagee shall have the right to vote
the shares unless stipulated otherwise.
a. Both statements are false
b. Both are true
c. Only the first is true.
d. Only the first is false
Answer: A

60. Which of the following statements is true and correct?

a. Where an obligation is secured by a pledge or mortgage and it is not paid when
due, the pledgee or mortgagee may appropriate the thing given by the way of
pledge and mortgage.
b. In both pledge and mortgage, the creditor is entitled to deficiency judgment.
c. Pledge and mortgage are accessory contracts because they cannot exist by
themselves.
 d. Unless otherwise agreed upon by the parties, the sale of the mortgaged property
extinguishes in full the mortgage constituted thereon.
Answer: C

61. A owes B a sum of money and secured by a pledge on his car. Later, the car is found
in the possession of A.
a. It is presumed the debt of A has been condoned.
b. It is presumed both the debt and pledge has been remitted.
c. It is presumed the debt is extinguished
d. It is presumed the pledge is condoned.
Answer: D

62. D owes C the following debts: P6 000 00 on June 12; P6, 000.00 due on June 15; P6,
000,000.00 due on June 18; and P6, 000,000.00 due on June 20. All debts are unsecured
except the debt due on June 20 which is secured by a pledge of D’s diamond ring to C.
By agreement, the benefit of the term on the 4 debts was made in a favor of D. Assuming
that D has P6, 000.00 on June 18 and is ready to pay C. Which of the following statements
are correct?
a. D may apply his payment of P6, 000.00 to any of the debts due on June 12, June
15, and June 18 since they are all due as of June 8.
b. D may apply it only to the debt due on June 20 because it is the most burdensome
to him
c. D must apply the payment proportionately to the debts due as of June 18 at P2,
000.00 each
d. D may apply the payment to any of the four debts.
Answer: D

1. A creditor, through a contractual arrangement made with Mr. Pala Utang, is to receive
the rentals of the Mr. Pala'Utang's apartinent houses in Quezon City with the obligation
to apply them to the payment of the interest and thereafter to the principal of his credit.
This contract is a valid.
a. Pledge
b. Antichresis
c. Mortgage
d. Guaranty
Answer: B
2. George secured and Randy granted a loan of PIM due on December 31, 2018. George,
executed a first mortgage of his residential house in favor of Randy to guarantee the loan.
On August 18, 2018. the house was totally destroyed by an accidental fin On August 31,
2018, Randy demanded payment of the loan. Is the demand valid?
a. No. The obligation is one with a definite date for payment.
b. No. The object of the obligation was lost through a fortuitous event and the
obligation was extinguished.
c. Yes. The obligation became due at once because the guaranty was lost through a
fortuitous event.
d. Yes. The obligation became due at once because from the tenor benefit, the
creditor is given the right to demand performance even before the due date
stipulated
Answer: C

3. B orally borrowed P1,000 from P. In order to secure the fulfilment of the loan, G orally
guaranteed the payment of B's loan to P. What is the status of the contract of guaranty?
a. Rescissible
b. Voidable
c. Unenforceable
d. Void
Answer: C

4. D is indebted to C for P100, 000 secured by a mortgage executed by M on his lot and
a guaranty by G. Which of the following is false If M offers to pay the loan?
a. Can be compelled to accept the payment
b. M will be subrogated to the rights of C
c. M can later on collect from G if D fails to pay M
d. If It turns out that D already paid half of the loan, M can only collect P50,000
5. D borrowed a sum of money from C with G as guarantor. The loan is in writing but the
guaranty is oral. D failed to pay C, who now is demanding payment from G. Can G be
compelled to pay?
a. Yes, because he is the guarantor obliged to pay in case the debtor defaults:
b. No, because the guaranty is void having been orally made.
c. No, because the guaranty is unenforceable, against G, it being oral.
d. Yes, because the guaranty is enforceable, writing not needed.
Answer: C
6. If the obligation is solidary, it means there is mutual guaranty among the debtors and
therefore the insolvency of one is shouldered by the others.
Solidarity may exist although the debtors may not be bound by the same term, condition
and manner of performance.
a. False, false
b. True, true
c. True, false
d. False, true
Answer: B

7. Which of the following contracts must be willing to be enforceable?

a. Acts and contract for the creation, transmission, modification, extinguishments of
real rights.
b. The cession, repudiation, renunciation of heredity rights
c. Contract of guaranty
d. Contract of partnership
Answer: C

8. A borrowed money from B with C as guarantor. The contract of loan of P1M was not in
writing while the guaranty was written. B now is demanding payment from C because A
failed to pay. Is C liable?
a. C is liable because the guaranty is enforceable although the loan is void it being
oral.
b. C is not able because the accessory contract of guaranty is void since the principal
contract loan is void.
c. C is liable because the guaranty is enforceable.
d. C is not liable because the contract of loan is in amount exceeding P500.00 which
must be in writing to be enforceable.
Answer: C

9. The debtor shall lose every right to make use of the period except:
a. When after the obligations has been contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt.
b. When he does not furnish a guaranty or security for the debt.
c. When the debtor attempts to ascond
d. When he violates any undertaking in consideration of which the creditor agreed to
the period.
Answer: B

10. A owes B P150, 000 due on August 31, 2000. A executed a mortgage in favor of B
on A's building to guaranty the obligation. On August 10, 2000, the mortgaged building
was totally lost due to an earthquake. On August 12, 2000, B demanded payment from
A. Is B's demand valid?
a. No. The obligation is one with a definite period, thus the creditor cannot demand
fulfilment of the obligation before it due.
b. No. The mortgage was extinguished because the object of the contract was lost
through a fortuitous event.
c. Yes. The debt becomes due at once because the guarantee was lost although
through a fortuitous event, unless the debtor can mortgage another property that
is equally satisfactory.
d. Yes. The debt becomes due at once because the period's benefits is given solely
to the creditor thereby giving the creditor the right to demand performance even
before the due date.
Answer: C

11. The debtor shall lose the right to make use of the period in the following cases, except:
a. When he becomes insolvent.
b. When he violates any undertaking in consideration of which of the creditor agreed
to the period
c. When the debtor attempts to abscond
d. When he does not furnish any guaranty or security to the creditor.
Answer: D

12. Essential elements of chattel mortgage, exception

a. The object is a personal or movable property
b. The thing mortgaged is not delivered to the creditor
c. The mortgagor cannot sell without the consent of the mortgagee
d. Description of the thing mortgaged must appear in a public instrument
Answer: C

13. A mortgaged his land to B to guarantee the debt of C. Despite repeated demands,
failed to pay B the latter to foreclose the mortgage. However, the proceeds were not
sufficient to settle the obligation of B. Can B go after A for the deficiency?
a. Yes, A is a guarantor
 b. Yes, the mortgage is binding upon A
c. No, only the land was offered as security
d. No, the mortgage was not registered with the Registry of Deeds
Answer: C

14. Not an element of contract of pledge and mortgage

a. Can stand alone
b. Maybe used to pay the obligation
c. Debtors must be the absolute owners
d. Debtors must have the free disposal of the objects.
Answer: A
15. The following are essential to a contract of pledge and mortgage, except:
a. That they be constituted to secure the fulfilment of a principal obligation
b. That the pledgor or mortgagor be the absolute owner of the thing pledged
at the time the obligation to deliver the same arises.
c. That the persons constituting the pledge of mortgage have the free disposal
of their property, and in the absence thereof, that they be legally authorized
for the purpose.
d. None of the above
Answer: B

16. An accessory contract of pledge or mortgage may secure any of the following, except:
a. A pure obligation
b. An obligation with a suspensive condition
c. An obligation with a resolutory condition
d. None of the above.
Answer: D

17. Legendairy Corporation (LC) borrowed money from Goliath Bank (GB) in the amount
of P100M. To secure the payment of the loan, 'LC executed a real estate mortgage over
its two parcels of land.
On due date, LC failed to pay, and GB caused the extrajudicial foreclosure of the
'mortgage. How long is the redemption period, if any?
a. Three months from the foreclosure sale or until registration of the sale, whichever
is earlier
b. B. Three months from the foreclosure sale
 c. C. One year from the foreclosure sale
d. D. Ninety days to one hundred twenty days from the foreclosure sale or untila
judicial order of confirmation of the sale
Answer: A

18. Harvey bought from Mike a motorcycle and the same was subjected to a chattel
mortgage. The terms of payment required Harvey to pay P10,000 as down payment and
the balance of P50,000 is payable at the end of the year. Harvey was not able to pay the
balance on due date. . Mike extrajudicially foreclosed the mortgage on the motorcycle
and at the auction, it was sold for P10,000 only. Which of the following is correct?
a. The Recto Law is not applicable since the sale is on credit and not in installment
b. Mike can no longer collect from Harvey the deficiency of P40,000 since he already
foreclosed the chattel mortgage
c. Foreclosure of the chattel mortgage was properly made even if there was no notice
given to Harvey
d. Harvey can redeem the property within 1 year from the foreclosure sale
Answer: A

19. The right of a mortgagor in a judicial foreclosure to redeem the mortgaged property
after his default in the performance of the conditions of the mortgage but before the
confirmation of the sale by the court is known as:
a. Accion publiciana
b. B. Equity of redemption
c. C. Right of pre-emption
d. D. Right of redemption
Answer: B

20. The disposal of the property subject to this accessory contract cannot be prohibited
by the creditor-pledgee/mortgagee:
a. Pledge
b. B. Real Estate Mortgage
c. C. Chattel Mortgage
d. D. None of the above
Answer: B
21. A, an illiterate, borrowed P100,000' from B. Aside from that, A mortgaged his land to
B which the latter accepted to secure the payment of the loan. B prepared a deed of sale
with right to repurchase of the land at a price of P100,000 which A signed after B
explained that such document evidenced their agreement. What is the proper legal
remedy available to A?
a. Action for reformation of instrument
b. Action for rescission of contract
c. Action for annulment of contract
d. Action for declaration of nullity of contract
Answer: B

22. Boy owes Bing to debts, both of which are already due. The first debt is secured by
registered chattel mortgaged constituted over a car belonging to Boy and the second is
not. Boy tells. Bing that the payment he is now making should be applied to the second
debt instead of the first, which is correct?
a. Bing cannot refuse the application if the first debt is older than the second
b. b. Bing may refuse such application on the ground that the first debt is more
burdensome to the debtor
c. c. Bing may refuse such application because the payment shall be applied
proportionately
d. d. Bing. cannot refuse the application because the preference of the debtor must
be followed
Answer: D

23. A borrowed P100,000 from B. The loan was secured by a mortgage of A's land in
favor of B. Without the knowledge of A, C paid B the sum of P100,000 for A's debt. As a
result
a. C cannot claim reimbursement from A inasmuch as the payment was made without
the knowledge of A
b. C is entitled to get reimbursement from A but did not acquire the right to foreclose
the mortgage
c. The obligation of A to.B was extinguished and A should reimburse C the amount
of P100,000 otherwise C can. foreclose the mortgage
d. C can recover the amount from A because there is legal subrogation
Answer: B
24. A stipulation whereby the creditor automatically becomes the owner of the thin's
pledged or mortgaged upon the debtor's default in the payment of his obligation is called
a. Acceleration clause
b. Conventional redemption
c. Legal redemption
d. Pactum commissorium
Answer: D

25. A sells to B a PANASONIC Colored TV for P12,000 payable in twelve equal monthly
installments beginning May 5, 2019 and every 5th day of each month thereafter. The
contract provides that upon failure to pay any installment due, the whole balance
becomes due and demandable. To secure the obligation, a chattel mortgage over the TV
set was executed: When B defaulted on the 7th and 8 th installments, A sued B for the
payment of the whole balance of P6,000. The TV set was levied and subsequently sold
at a public sale for P5,000. Can A still recover the deficiency of P1,000 from B?
a. Yes, if there was stipulation to that effect
b. Yes, even though there was no stipulation
c. No, any stipulation allowing recovery is void
d. No, if there was no stipulation to that effect
Answer: B

26. This is an accessory contract.

a. Sales
b. Mutuum
c. Commodatum
d. Mortgage
Answer: D

27. Which of the following is true and correct?

a. Unless otherwise agreed upon by the parties, the sale of the mortgaged properly
extinguishes in full the obligation of the mortgagor to the mortgagee.
b. Pledge and mortgage are considered principal contracts.
c. When the obligation is secured by a pledge or mortgage and it is to paid when due,
the pledgee or mortgagee may dispose the collateral even if there is no agreement
to that effect between the parties.
d. In both pledge and mortgage, the creditor is entitled to deficiency judgement
Answer: C
28. Gross inadequacy of the purchase price does not invalidate the contract of sale;
unusually inadequate purchase price in a sale with right of repurchase shall give rise to
the presumption that:
a. It is a vitiated sale
b. B. It is an equitable mortgage
c. C. It is not a sale
d. D. It is an invalid sale
Answer: B

29. X borrowed money from a bank, secured by a mortgage on the land of Y, his close
friend. When the loan matured; Y offered to pay the bank but it refused since Y was not
the borrower. Is the bank's action correct?
a. No, since anybody can discharge X's obligation to his benefit.
b. Yes, since it was X who has an obligation to the bank.
c. Yes, since X, the true borrower, did not give his consent to Y's offer to pay.
d. No, since Y, the owner of the collateral; has an interest in the payment of the
obligation
Answer: D

30. B purchased a specific car from S for P1,200,000 payable by a downpayment of

P600,000 and the balance in 12 equal monthly Installment of P50,000 each. A chattel
mortgage on the said car was executed to serve as security. B defaulted on the 7th and
8th monthly installments. The chattel mortgage on the car was foreclosed but the auction
sale resulted into a deficiency of P100,000. Under Recto Law, what is the remedy to
recover deficiency?
a. Auction the other properties of B for P100,000,
b. Cancel the Installments
c. File a collection suit for P100,000 against B
d. No other remedy on the deficiency
Answer: D

31. Which is NOT essential requisite of contract of chattel mortgage for its validity?
a. The mortgagor must be the absolute owner of the personal property mortgaged
and must have free disposal of the personal property mortgaged.
b. There must be a secured valid principal obligation and in case of its non-payment,
the personal property mortgaged may be sold in public auction in satisfaction
secured of the second obligation
c. The chattel mortgage must be properly rolntored in chattel mortgage registry
 d. The deed of chattel mortgage must be accompanied by affidavit of good faith.
Answer: D

32. Phone valley disappointed persons, where shall chattel mortgage executed on a
private motor vehicle be registered?
a. Chattel mortgage registry where the mortgage resides
b. Land Transportation Office
c. Both A and B
d. Neither A nor B
Answer: D

33. A borrowed 100,000 from B and executed a chattel mortgage on his house and lot as
a security for his debt to B. When the principal obligation became due, A did not pay
despite demand for payment from B. Which is CORRECT
a. B has no right to foreclose the chattel mortgage because he can sue for collection.
b. B has no right to foreclose the chattel mortgage unless A consents to the
foreclosure.
c. B may foreclose the chattel mortgage because A is eslopped from claiming the
invalidity of the chattel mortgage over the real property but foreclosure should be
made under the procedure of real estate mortgage law
d. B has no right to foreclose the chattel mortgage because the house and lot are not
chattels. Thus, the contract of chattel mortgage is null and void.
Answer: C

34. A, an illiterate, borrowed P100,000 from B. Aside from that, A mortgaged his land to
B which the latter accepted to secure the payment of the loan. B prepared a deed of sale
with a right to repurchase of the land at a price of P100,000 which A signed after B
explained that such document evidenced their true agreement. What is the proper legal
remedy available to A?
a. Action for reformation of instrument
b. Action for rescission of contract
c. Action for annulment of contract
d. Action for declaration of nullity contract
Answer: A
35. Which of the following contracts is perfected by the delivery of the subject matter of
the contract?
a. Contract of sale
b. Contract of partnership
c. Contract of pledge
d. Contract of real estate mortgage
Answer: C.

36. A borrowed P100,000 from B and mortgaged his house to secure the payment of the
loan. The contract of real estate mortgage is not notarized and not registered with
Registry of Deeds. The contract of real estate mortgage provides that A is prohibited from
selling the mortgaged house and in case of default of A at the maturity date of the loan,
B will become the automatic owner of the mortgaged house. Which of the following
statements is CORRECT?
a. A may still sell the house to third person despite the prohibition in the contract of
real estate mortgage.
b. B becomes the owner of the mortgaged house upon default of A.
c. The contract of real estate mortgage is null and void because of the stipulation of
pactum commissorium which is contrary to law and public policy.
d. The contract of real estate mortgage is unenforceable because it is not in public
document and not registered with Registry of Deeds
Answer: A

37. D borrowed P100,000 from C and entered into a chattel mortgage involving his land
to secure the payment of his loan. D failed to pay the loan at maturity date. Which of the
following statements is CORRECT?
a. The contract of chattel mortgage is null and void in so far as the contracting parties
are concerned because subject matter is a land.
b. C cannot foreclose the chattel mortgage over the land because the subject matter
must be a movable property.
c. C may still foreclose the chattel mortgage on the land on the basis of doctrine of
estoppel.
d. Third person directly affected by the contract of chattel mortgage is not allowed to
file an action for declaration nullity because of relativity of contract.
Answer: C
38. Alphine Corporation obtained a loan amounting to P1,000,000.00 from Eastern Bank.
To secure the obligation, P, the president of Alphine, mortgaged his own building in favour
of the bank. The contract of loan and deed have been signed by the parties but have not
been acknowledged before a notary public. Which is CORRECT?
a. Aphine Corporation and P are one and the same person.
b. P may validly mortgage his own property secure the obligation of Alphine to the
bank.
c. The mortgage is not yet binding between the parties since it has not been
notarized.
d. The mortgage contract can stand independently from the contract of loan:
Answer: B

39. Angel sold his specific car to Bez at instalment price. of P100,000 payable in 10 equal
monthly instalments starting January 1, 2000.As security for the payment of the price,
Bez executed a contract of chattel mortgage over the said car in favor of Angel The
contract of sale provides that in case of cancellation of contract of sale, the instalments
already paid by Bez will be forfeited in favor of Angel. The contract of chattel mortgage
provides that Angel may recover the deficiency in case of chattel mortgage foreclosure.
After payment of seven monthly instalments, Bez defaulted on the remaining instalments.
If Angel opted to foreclose the chattel mortgage over the car which resulted to net
proceeds of P25,000 in public auction, which is CORRECT?
a. Angel can never recover the deficiency despite the stipulation for recovery in the
contract of chattel mortgage.
b. Angel can recover the deficiency because there is stipulation for recovery.
c. Angel may still file an action for exact fulfilment to recover the deficiency after the
foreclosure of chattel mortgage over the car.
d. Angel may recover the deficiency if the judgement provides.
Answer: A

40. Using the same data in preceding number except from the fact that Angel opted to
file an action for exact fulfilment which resulted to issuance of writ of attachment.
Afterwards, the public sale resulted to net proceeds of P25,000. Which is CORRECT?
a. Angel can never recover the deficiency despite the stipulation for recovery in the
chattel mortgage.
b. Angel can recover the deficiency because there is stipulation for recovery.
c. Angel can still foreclose the chattel mortgage to recover the deficiency.
d. Angel may recover the deficiency even without stipulation for recovery.
Answer: D
41. A borrowed P1M from B.A mortgaged his land to secure the fulfilment of the contract
of loan. The real estate mortgage contract provides that B will become the automatic
owner of the land upon default of A and. At the maturity date of the loan, A defaulted. B
foreclosed the real estate mortgage and tried to sell it in public auction. Two public
auctions were held, but there were no bidders. Which is CORRECT?
a. B may appropriate the land since it is not sold in the first and second public
auctions.
b. B becomes the owner of the land upon default of A since that is provided in the
contract.
c. A is no longer liable to pay the loan since the land is not sold in the first and second
public auctions.
d. A remains to be the owner of the land and remains to be liable to B.
ANSWER: D

42. X borrowed money from a bank, secured by a mortgage on the land of Y, his close
friend. When the loan matured, Y offered to pay the bank but it refused since Y was not
the borrower. Is the bank’s action correct?
a. Yes, since X, the borrower, did not give his consent to Y’s offer to pay
b. No, since anybody can discharge X’s obligation to his benefit
c. No, since Y, the owner of the collateral, has an interest in the payment of the
obligation
d. Yes, since it was X who has an obligation to the bank
ANSWER: C

43. A borrowed Php 1M from a bank secured by a mortgage on his land. Without his
consent, his friend B paid the whole loan. Since A benefited from the payment, can B
compel the bank to subrogate him to its right as mortgagee of A’s land?
a. No, but the bank can foreclose and pay B back
b. No, since B paid for A’s loan without his approval
c. Yes, since a change of creditor took place by novation with the bank’s consent
d. Yes, since it is but right that B be able to get back his money and, if not, to foreclose
the mortgage in the manner of the bank
ANSWER: B
44. X constituted a chattel mortgage on a car (valued at Php 1M) to secure a Php 500,000.
For the mortgage to be valid, X should have
a. The right to mortgage the car to the extent of half of its value
b. Ownership of the car
c. Unqualified free disposal of his car
d. Registered the car in his name
ANSWER: C

45. A sold his piano to B for P200,000 payable in installment. A chattel mortgage was
constituted on the piano. B defaulted in two installment payments. A demanded payment
of the unpaid obligation amounting to P120,000 and a writ of attachment was issued and
the piano was sold for P100,000. Can A still recover the deficiency?
First Answer – No, the foreclosure of the piano extinguished B’s obligation
Second Answer – Yes, only if it is stipulated that in case of foreclosure the buyer will pay
any deficiency
a. True, True
b. True, False
c. False, True
d. False, False
ANSWER: D

46. D mortgaged his land to C as security for a loan. Fearing foreclosure of the mortgage
due to this inability to pay the loan D sold the land to B without the consent of C. Which
is correct?
a. The sale is void unless D can give another security
b. B cannot acquire ownership over the land even if D delivers the land to him
c. D cannot sell the land if there is an agreement prohibiting the mortgagor from
alienating the land
d. D can sell the land even without the consent of C
ANSWER: D

47. Which of the following statements is not correct?

a. If the thing pledged will be returned by the pledgee, the contract of pledge is
extinguished
b. Unlawful partnership is void ab initio
c. Any stipulation allowing the pledgee or mortgagee to appropriate the thing pledged
or mortgaged is void
 d. In case the creditor foreclosed the chattel mortgage, he cannot recover any
deficiency in case the proceeds of the foreclosure sale are less than the unpaid
obligation
ANSWER: D

48. For failure of the debtor to pay two installment payments, the creditor foreclosed the
chattel mortgage constituted to secure the obligation amounting to P200,000. The
proceeds amounted to P220,000. In this case
a. The debtor gets the P20,000 only if stipulated
b. The debtor gets the P20,000 even if not stipulated
c. The creditor gets the excess even if not stipulated
d. The creditor gets the excess whether or not it is stipulated
ANSWER: B

49. Similarly, between real estate mortgage and antichresis

a. The property is delivered to the creditor
b. The subject matter is a real property
c. The creditor acquires the right to receive the fruits of the property
d. The creditor is obliged to pay the taxes and charged upon the estate
ANSWER: B

50. An oath in a contract of chattel mortgage wherein the parties severally swears that
the mortgage is made for the pupose 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 is
a. Oath of allegiance
b. Antichresis
c. Affidavit of good faith
d. Equity of redemption
ANSWER: C
51. J mortgaged his residential land to R as guarantee for the payment of P500,000 loan
of J. They agreed that J will not sell the land while the obligation exists. Before the maturity
of the mortgage, C offered to buy the land from J. Which of the following statements is
correct?
a. J cannot sell the land to C because of the agreement not to sell
b. J can sell the land to C only if R consents in writing
c. J can sell the land to C despite the agreement not to sell
d. J cannot sell the land to C unless J pays R the obligation
ANSWER: C

52. The following are essential requisites common to the contract of pledge and
mortgage, except,
a. That they are constituted to secure the fulfillment of a principal obligation
b. That the pledgor or mortgage is the absolute owner of the thing pledged or
mortgaged
c. That the contract is registered with the Register of Deeds
d. That the person constituting the contract has free disposed of his property or that
he is authorized legally for the purpose
ANSWER: C

53. First Statement – in all cases of extrajudicial sale, the mortgagor may redeem the
property at any time within the term of one year from and after the date of registration of
the sale
Second Statement – in judicial foreclosure of real estate mortgage, the general rule is
that the mortgagor cannot exercise his right of redemption after the confirmation of the
sale by the court.
a. Both Statement are correct
b. Both Statement are wrong
c. Only the first statement is correct
d. Only the second statement is correct
ANSWER: A

54. These are real contracts, except

a. Commodatum
b. Deposit
c. Pledge
d. Chattel mortgage
ANSWER: D

55. The creditor cannot appropriate the thing pledged or mortgaged, or disposed of them.
Any stipulation to the contract is void
The contract of pledge or mortgage may secure all kinds of obligation be they pure or
subject to a suspensive or resolutory condition
a. True, True
b. True, False
c. False, True
d. False, False
ANSWER: A

56. Jake Peralta and Amy Rodrigues are co-workers. Amy filed for a loan in B99 Bank
where Jake was a cosignatory solidarily liable for the loan but did not receive any
proceeds there from. Jake executed a real estate mortgage over his own real property to
secure said loan. Amy not being able to pay, 899 Bank foreclosed the mortgage. In this
case,
a. B99 cannot foreclose the mortgage since Jake, the mortgagor, did not receive any
of the proceeds of the loan.
b. In case the proceeds of the foreclosure is not sufficient to pay off the balance, Jake
can be made liable for the deficiency.
c. Only Amy can be made liable for the unpaid loan being the sole recipient of the
proceeds
d. Jake can no longer be made liable for any deficiency.

57. D is indebted to C for P100, 000 secured by a mortgage executed by M on his lot and
a guaranty by G.Which of the following is false If M offers to pay the loan?
a. Can be compelled to accept the payment
b. M will be subrogated to the rights of C
c. M can later on collect from G if D fails to pay M
d. If It turns out that D already paid half of the loan, M can only collected.

58. Amy Sosa sold to Dina Fox a truck for P2, 000,000 secured by a chattel mortgage on
the truck. For added security, Dina’s friend Jonah Simms executed a mortgage over his
land in favor of Amy. Amy and Dina agreed that the latter would pay 10% down payment
and the balance to be paid in monthly Installments of P100, 000 for 19 months. Dina
eventually defaulted twice and left a balance of the purchase price amounting to P1,
200,000. Amy then foreclosed the mortgage over the land and sold it in a public sale for
P1, 500,000. In this case, who is entitled to the excess?
a. Amy
b. Dina
c. Jonah
d. All of them, equally
59. In this accessory contract, the excess of the proceeds in the foreclosure sale over the
unpaid obligation would, as a rule, go to the creditor:
a. Pledge
b. Chattel Mortgage
c. Real Estate Mortgage
d. None of the choices
60. In a chattel mortgage, the disposal of the thing given as security during the pendency
of the contract of mortgage is:
a. If there Is consent from the creditor-mortgagee but possession remains with the
creditor-mortgagee
b. Allowed always and any stipulation to the contrary would be void
c. A criminal act punished under the Revised Penal Code
d. Not allowed under any circumstance
61.The period to redeem the foreclosed real property If the creditor is a juridical person
and the debtor is a bank would be:
a. 1 year
b. 3 months
c. Until the certificate of sale is registered
d. 3 months or until registration of the certificate of sale, whichever is earlier
62. A constituted in 2014 a real estate mortgage on his land and a chattel mortgage on
his car to secure the payment of a debt of P. 2M which he then owed to B, as well as
other loans he may receive from him in the future. A paid his debt of P.2M but not the
loan of P.03M which he obtained in 2015. Can A foreclose both mortgages for the P.03M
loan obtained in 2015?
a. No, because the mortgages can only foreclose one of the mortgages applying the
Recto Law to prevent collection at deficiency.
b. No, only the mortgage on the car can be foreclosed.
c. No, only the mortgage on the land can be foreclosed.
d. Yes, both mortgages.
Answer: A
63. D mortgage his Land to C with the stipulation that the former cannot sell his land
before he has paid his loan to C. D sold the land to X despite such agreement. Which of
the following is correct?
a. The contract of sale is void.
b. The consent of C is necessary before D can sell the land.
c. The stipulation prohibiting sale of the land is void.
d. The sale is valid if the buyer was not aware of the mortgage.
Answer: B

64. D obtained from C a loan amounting to P50, 000.00, the same being secured by a
mortgage on D's lot. Thereafter, C assigned his credit right to T with notice to D. Based
on the foregoing facts, which of the following statements is incorrect?
a. T cannot collect from D if D does not give his consent to the assignment.
b. T can collect from D. D's consent to the assignment is not required.
c. T can collect from D and D cannot pay, T can foreclose the mortgage on the lot.
d. The notice to D of the assignment is sufficient. D must make his payment to T and
no longer to C
Answer: A

65. A and B entered into a contract of mortgage. However, as written, the document states
it is a contract of sale with right of repurchase, the error due to the fault of the clerk/typist.
Hence:
a. The contract of sale must be annulled since it is voidable.
b. The instrument has to be enforced as is for it is the proof of the agreement between
the parties.
c. Because of the negligence of the parties in signing without first reading the
instrument, they are bound by the contents of the same.
d. The instrument may be reformed because it does not express the true agreement
of the parties.
Answer: D
66. Kind of mortgage which, although lacking some formality, form of words, or requisites
prescribed by law, show the intention of the parties to charge real property as security for
debt and contains nothing impossible or contrary to law is known as:
a. Legal mortgage.
b. Equitable mortgage
c. Conventional mortgage
d. Voluntary mortgage
Answer: B

67. A borrowed P1 million from a bank, secured by a mortgage on his land. Without his
consent, his friend B paid the whole loan. Since A benefited from the payment, can B
compel the bank to subrogate him in its right as mortgagee of A's land?
a. No, but the bank can foreclose and pay B back.
b. No, since B paid for A's loan without his approval.
c. Yes, since a change of creditor took place by novation with the bank's consent.
d. Yes, since it is but right that B be able to get back his money and, if not, to foreclose
the mortgage in the manner of the bank?
Answer: B

68. A gets a loan of P1M from B which becomes due on October 1, 2003 and mortgaged
his house as security for the debt. On June 30, 2003, the mortgaged house completely
destroyed by fire thru the fault of C. A week later, B demanded payment from A. Is B's
demand valid?
a. No, the destruction of the house was not thru the fault of A.
b. No, the obligation is one with a definite period which is deemed intended for the
benefit of both the debtor and creditor
c. Yes, the debt becomes demandable unless A can give another security equally
satisfactory
d. Yes, the debt becomes demandable even if A can give another security equally
satisfactory
Answer: C

69. S sold to B a car on installment wherein the latter mortgaged the same car as security
for the price. Failing to pay the installments, the mortgage on the car was foreclosed. Is
B still liable for any deficiency if the seller fails to recover in the foreclosure sale?
a. Yes, because it is only in case of pledge is the debtor not liable for any deficiency.
b. Yes, if so stipulated upon by the parties.
c. No, unless agreed upon by the parties.
 d. No, notwithstanding any stipulation to the contrary.
Answer: D

70. D mortgaged his car to C as security for a loan. Failing in the payment of the loan, C
foreclosed the chattel mortgage and sold the car at public auction. In case of deficiency,
is D liable for it?
a. Yes, in the absence of contrary stipulation.
b. No, because it would be unjust enrichment on the part of creditor.
c. Yes, if so agreed upon by the parties.
d. No, unless stipulated.
Answer: A

71. D mortgaged his parcel of land to C as security for a loan. Fearing foreclosure of the
mortgage due to his inability to pay the loan, D sold the land to X without the consent of
C. Is the sale valid?
a. No, unless there was prior consent of the mortgage.
b. Yes, stipulation prohibiting the sale without the consent of the mortgagee shall be
void.
c. Yes, provided the mortgagee was notified before the sale.
d. No, if there was stipulation requiring prior consent.
Answer: B

72. D owes C a sum of money with M as mortgagor of his land to secure the loan. Is the
mortgage valid even if the mortgagor is not the debtor?
a. Yes, provided the mortgagor or pledgor in case of pledge is the absolute owner of
the property mortgaged or pledged.
b. Yes, provided it is in writing and registered.
c. No, the mortgagor/pledgor must be the debtor himself.
d. No, unless the mortgagor is a co-debtor.
Answer: A

73. D constituted a chattel mortgage on his car as security for the loan he obtained from
C of P1M. It was further stipulated that the same mortgage shall secure the payment of
another loan which the debtor D may incur in the future. Is the chattel mortgage valid?
a. The chattel mortgage for both loans is valid
b. The mortgage for the P1M is the only one valid
 c. The mortgage as regards the future loan is the one valid
d. The mortgage is extinguished because of the void stipulation on the ground that it
cannot secure a future obligation
Answer: B

74. (1) In conventional pledge, there is no deficiency liability on the part of the pledgor
inspite of stipulation to the contrary.
(2) In legal pledge, the excess of the proceeds of the sale after foreclosure shall pertain
to the pledgor even in the absence of stipulation.
a. Both statements are false
b. Both are true
c. First is false, second is true
d. First is true, second is false
Answer: B

75. Chattel mortgage as distinguished from pledge:

a. The excess over the amount due after foreclosure goes to the debtor
b. The sale of the object in an auction extinguishes the obligation
c. The delivery of the personal property is necessary
d. The registration of the property in the Registry of Property is not necessary.
Answer: C

76. The following are essential requisites common to pledge and mortgage except one:
a. They are constituted to secure the fulfillment of a principal obligation
b. The pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged
c. The contract of pledge or mortgage is registered with the Register of deeds
d. The person constituting the pledge or mortgage has the free disposal of the thing
or he is legally authorized for the purpose
Answer: C

77. (1) In all cases of extra judicial foreclosure, the right of redemption can be exercised
buy the mortgagor within one year from and after the juridical registration of sale.
(2) In judicial foreclosure, the mortgagor may still exercise his equity of redemption after
the confirmation of the sale by the court.
a. Both statements are true
 b. Both are false
c. First is false, second is true
d. First is true, second is false
Answer: D

78. A pledged his Toyota car to B for a loan of P1M. A was unable to pay the loan and
therefore sold the car in a public auction but it was sold only for P.5M. Can B recover the
deficiency from A?
a. No, he cannot recover the deficiency on the absence of contrary stipulation
b. No, he cannot even if there is an agreement that he can
c. Yes, he can even in the absence of stipulation allowing him
d. Yes, he can, provided it was agreed upon by the parties
Answer: B

79. A pledged his wristwatch to B pawnshop for a loan of P7, 000 which he failed to pay.
B sold the watch at a public auction for P4, 000.
a. The pawnshop B can recover the P4,000 deficiency from A
b. It cannot recover the deficiency from A unless there is stipulation to the contrary
c. It cannot recover the deficiency even if there is stipulation allowing it
d. It cannot recover the deficiency if there is stipulation disallowing recovery
Answer: C

80. The following are instances of pledge created by operation of law, except:
a. Hotelkeeper retains the things brought into the hotel by the guest who cannot pay
his hotel bill
b. An agent retains in pledge the thing which is the object of the agency until he is
paid his commission
c. A mechanic retains the car he repaired until he is paid
d. A depository retains the thing in pledge until full payment of what is due him
Answer: B

81. A pledge his wristwatch to B for a loan of P.1M. Due to A’s failure to pay his debt, B
auctioned the watch and was sold to C for P.15M. Can A recover the excess?
a. A cannot recover the excess even if so stipulated by the parties
b. A can recover the excess if so agreed upon by the parties
c. A can recover the excess even if not so stipulated
 d. A stipulation allowing the excess to go to the pledgor is void
Answer: B

82. (1) In a pledge created by operation of law, after payment of the debt and expenses,
the remainder of the price of the sale in auction shall be delivered to the obligor, pledgor
being entitled to the excess.
(2) If a credit which has been pledged becomes due before it is redeemed, the pledgee
may collect and receive the amount due and apply the same to the payment of his claim
with the excess going to the pledgor.
a. Both statements are false
b. Both are true
c. First is false, second is true
d. First is true, second is false
Answer: B

83. A mortgaged his Rolex watch to B for a loan of P.2M. Due to the failure of A to redeem
the security, B sold the same at public auction for P.15M to the highest bidder.
a. B can recover the deficiency of P.05M from A
b. B can recover the deficiency from A if so stipulated
c. B can recover the deficiency if there is no contrary agreement
d. B cannot recover the deficiency even if there is stipulation
Answer: A

84. The difference between a chattel mortgage and a pledge is that in chattel mortgage:
a. The delivery of the personal property is necessary
b. The registration of the contract with the Register of Deeds needed
c. The excess over the amount due after foreclosure sale goes to debtor
d. The debtor is not liable for the deficiency after foreclosure
Answer: C

85. X borrowed money from Y and gave a piece of land as security by way of mortgage.
It was agreed between the parties that upon non-payment of the loan, the land would
already belong to Y. If X failed to pay the debt, would Y now become the owner of the
land?
a. Y would become the owner because it was agreed upon by them based on the
principle of autonomy of contracts
 b. Y would not become the owner because the agreement that he would become the
owner upon default of X is against the law
c. Y would become the owner but with right of redemption by X
d. Y would not become owner if X annuls the voidable agreement
Answer: B

86. Suppose in the preceding question, the agreement between X and Y was that if X
defaulted in the payment of his debt, it shall be paid with the land mortgaged to Y. Would
your answer be the same?
a. Yes, because it is still an agreement prohibited by law
b. Yes, because the agreement is voidable which X can annul
c. No, because stipulation is not against the law
d. No, provided the stipulation is in writing
Answer: C

87. In the province, a farmer couple borrowed money from the local merchant. To
guarantee payment, they left the Torrens Title of their land with the merchant, for him to
hold until they pay the loan. It is:
a. Pledge
b. Mortgage of chattel
c. Real mortgage
d. None of the above
Answer: C

88. A constructed a building on a parcel of land he leased from B. He chattel mortgaged

the building to C. The building is concrete.
a. No chattel mortgage because the building is real property
b. There is chattel mortgage as agreed upon by the parties
c. No chattel mortgage unless it is registered with the Registry of Deed
d. No chattel mortgage because the building can never be considered movable
despite agreement of parties
Answer: A

89. In 1982, D borrowed P.4M from C, collateral by a pledge of shares of stocks of X

corporation worth P.8M. In 1983, because of the economic crisis, the value of the shares
pledged fell to only P.1M. Can C demand that D surrender the other shares worth P.7M?
 a. Yes, because the collateral as security for the loan was worth P.8M and therefore
the other shares of P.7M must be delivered
b. No, because the only right of C is to sell the shares at the public auction and keep
the proceeds as security for thestipu
c. No, because the right of C is to demand immediate payment of the loan
d. No, because the right of C is to demand another thing worth P.8M
Answer: B

90. C lent to D P.1M. As security for the loan, D pledged his Rolex watch. When D failed
to pay the loan, C foreclosed the pledge, and the watch was sold only for P.08M. May C
still claim payment of the deficiency from D?
a. D is no longer liable for the deficiency unless otherwise agreed
b. D is not liable for the deficiency despite stipulation to the contrary
c. D is still liable for the deficiency even in the absence of agreement
d. D is still liable if agreed upon
Answer: B

91. In the preceding case, suppose it was a contract of mortgage, can C still claim
payment of the deficiency?
a. Yes, provided it was agreed upon
b. No, unless there was stipulation
c. Yes, even in the absence of stipulation
d. No, even if stipulated
Answer: C

92. Still in the preceding case, suppose the watch was sold at a price greater than the
amount of loan, who is entitled to the excess? If pledge:
a. C is entitled to the excess even in the absence of stipulation
b. C is entitled if there is stipulation
c. D is entitled even if there is no stipulation
d. D is not entitled even if there is no stipulation
Answer: A

93. If chattel mortgage:

a. C is entitled to the excess unless there is a contrary stipulation
b. D is entitled if so stipulated
 c. C is entitled even in the absence of stipulation
d. D is entitled even if not stipulated
Answer: D

94. A constituted in 1999 a real estate mortgage on his land and a chattel mortgage on
his car to secure the payment of a debt of P.2M which he then owed to B, as well as other
loans he may receive from him in the future. A paid his debt of P.2M but not the loan of
P.03 which he obtained in 2000. Can A foreclose both mortgages for the P.03M loan
obtained in 2000?
a. No, because the mortgagee can only foreclose one of the mortgages applying the
Recto Law to prevent collection of deficiency
b. No, only the mortgage on the car can be foreclosed
c. No, only the mortgage on the land can be foreclosed
d. Yes, both mortgages
Answer: C

95. D mortgage his land to C with the stipulation that the former cannot sell his land before
he has paid his loan to C. D sold the land to X despite such agreement. Which of the
following is correct?
a. The contract of sale is void
b. The consent of C is necessary before D can sell the land
c. The stipulation prohibiting sale of the land is void
d. The sale is valid if the buyer was not aware of the mortgage
Answer: C

96. D obtained a loan from C. X pledged his car as security. Which of the following is not
correct?
a. The pledge is not valid because the debtor is not the owner of the thing pledged
b. The pledgor must be the owner of the thing pledged
c. The thing pledged must be delivered to the pledgee or a third person by common
consent of the parties
d. The pledgee does not become owner of the thing pledged upon the non-payment
of the debt
Answer: A
97. D used his bicycle to C as a security for a loan with the agreement that D shall remain
in possession of the said bicycle until the loan is paid. The contract is one of:
a. Pledge
b. Real mortgage
c. Chattel mortgage
d. Loan only
Answer: C

98. In which of the following instances are the goods still in transit which will allow the
unpaid seller to exercise his right of stoppage in transitu in case of insolvency of the
buyer?
a. If the buyer obtains delivery of the goods before arrival at the appointed
destination.
b. If the carrier or other bailee acknowledges to the buyer or his agent, that he is
holding the goods in his behalf, after arrival of the goods at their appointed
destination.
c. If the carrier or other bailee wrongfully refuses to deliver the goods to buyer or his
agent.
d. If the goods are rejected by the buyer, and the carrier or other bailee continues in
possession of them, even if the seller has refused to receive them back.
Answer: D

99. Which of the following is not correct?

a. A movable or immovable property maybe the object of commodatum
b. The bailor in commodatum need not be the owner of the thing loaned
c. A stipulation that the bailee may make use of the fruits of the thing loaned is valid
d. The bailor is obliged to pay for the ordinary expenses for the use and preservation
of the thing loaned
ANSWER: D

100. In three of the following cases, compensation cannot be claimed by the debtor
except:
a. By the bailee in commodatum;
b. By the depositor in a contract of deposit:
c. By the person obliged to give support due by gratuitous title;
d. By the debtor in an obligation arising from a penal offense.
Answer: B
101. Which of the following is not correct?
a. A movable or immovable property maybe the object of commodatum
b. The bailor in commodatum need not be the owner of the thing loaned
c. A stipulation that the bailee may make use of the fruits of the thing loaned is valid
d. The bailor is obliged to pay for the ordinary expenses for the use and preservation
of the thing loaned
ANSWER: D

102. In antichresis, the requirement that the principal and interest be stated in writing is
for the purpose of
a. Validity
b. To affect third persons
c. Enforceability
d. None of the above
Answer: A

103. A creditor, through a contractual arrangement made with Mr. Pala Utang, is to
receive the rentals .of the Mr. Pala'Utang's apartinent houses in Quezon City with the
obligation to apply them to the payment of the interest and thereafter to the principal of
his credit. This contract is a valid.
a. Pledge
b. Antichresis
c. Mortgage
d. Guaranty
Answer: B

104. Similarly, between real estate mortgage and antichresis

a. The property is delivered to the creditor
b. The subject matter is a real property
c. The creditor acquires the right to receive the fruits of the property
d. The creditor is obliged to pay the taxes and charged upon the estate
ANSWER: B

105. D borrowed from C P1, 000,000 to secure the payment of which the former verbally
agreed to deliver his 4 hectare agricultural land by way of antichresis and to pay 12%
interest per annum. The contract of loan and antichresis -
 a. Are both valid
b. Both null and void
c. The loan is valid but the antichresis is null and void
d. The contract of antichresis is valid, but the loan is null and void.
Answer: C

107. Antichresis must be in writing and involves only immovables. In pledge and Recto
Law there is no deficiency liability.
a. False, false
b. True, true
c. False, true
d. True, false
Answer: B