1

SECURI TY TRANSACTI ONS

MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
PROVISIONS COMMON TO PLEDGE AND MORTGAGE (Art 2085-2123)
PLEDGE (d!"#"t"$#) - A contract by virtue of which the debtor delivers to the creditor or
to a third person a movable or document evidencing incorporeal rights for the
purpose of securing the fulfillment of a principal obligation with the understanding
that when the obligation is fulfilled, the thing delivered shall be returned with all its
fruits and accessions.
E%%#t"&' R()"%"t% t$ C$#tr&*t% $! P'd+ &#d M$rt+&+
1. constituted to secure the fulfillment of a principal obligation
2. pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged
3. the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the
purpose
4. cannot exist without a valid obligation
. when the principal obligation becomes due, the thing in which the pledge or
mortgage consists may be alienated for the payment to the creditor.
third persons not parties to the principal obligation may secure the latter
by pledging or mortgaging their own property
but may be constituted to secure fulfillment of a voidable or unenforceable
or natural obligation
in case of pledge, the thing pledged must be delivered to the creditor or to
a third person by common agreement
in case of mortgage, as a general rule, the mortagagor retains he
possession of the property mortgaged
,"#d% $! P'd+-
1. !oluntary or conventional " created by agreement of the parties
2. #egal $ created by operation of law
C.&r&*tr"%t"*% $! P'd+-
1. real $ perfected by delivery
2. accessory $ has no independent existence of its own
3. unilateral $ creates obligation solely on the part of the creditor to return the thing
sub%ect upon the fulfillment of the principal obligation
4. subsidiary " obligation incurred does not arise until the fulfillment of the principal
obligation
C&)% $r C$#%"dr&t"$# "# P'd+
1. principal obligation " in so far as the pledgor is concerned
2. compensation stipulated for the pledge or mere liberality of the pledgor " if
pledgor is not the debtor
I/0$rt&#t P$"#t%-
1. future property cannot be pledged or mortgaged
2. pledge or mortgage executed by one who is not the owner of the property
pledged or mortgaged is without legal existence and registration cannot validate
it.
3. mortgage of a con%ugal property by one of the spouses is valid only as to & of the
entire property
4. in case of property covered by 'orrens title a mortgagee has the right to rely
upon what appears in the certificate of title and does not have to in(uire further.
. pledgor or mortgagor has free disposal of property
). thing pledged or mortgaged may be alienated.
*. creditor not re(uired to sue to enforce his credit
+. pledgor or mortgagor may be third person
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SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
PLEDGE MORTGAGE
,onstituted on movables ,onstituted on immovables
-roperty is delivered to the pledgee, or by
common consent to a 3
rd
person
.elivery not necessay
/ot valid against 3
rd
persons unless a
description of the thing pledged and the
date of the pledge appear in a public
instrument
/ot valid against 3
rd
persons if not
registered
0ight of ,reditor where .ebtor fails to ,omply with his 1bligation
1. creditor is merely entitled to move for the sale of the thing pledged or mortgaged
with the formalities re(uired by law in order to collect
2. creditor cannot appropriate to himself the thing nor can he dispose of the same
as owner.
-rohibition against pactum commissorium
1. stipulation is null and void $ stipulation where thing or mortgaged shall
automatically become the property of the creditor in the event of nonpayment of
the debt within the term fixed
2. Requisites of pactum commissorium:
a. there should be a pledge or mortgage
b. there should be a stipulation for an automatic appropriation by the creditor
of the property in the event of nonpayment
3. Effect on Security Contract
$nullity of the stipulation does not affect validity and efficacy of the principal
contract
-ermissible 2tipulations with regard to pactum commissorium3
1. subse(uent modification of original contract by agreement of parties
2. subse(uent voluntary act of the debtor ma4ing cession of property in payment of
the debt
3. promise to assign or sell said property in payment of the obligation if, upon its
maturity, it is not paid
4. authorizing the mortgagee to ta4e possession of the mortgaged premises upon
the foreclosure of a mortgage
. if after the first and second auctions, the thing is not sold
5mportant -oints3
1. debtor$owner bears the ris4 of loss of the property
2. pledge or mortgage is indivisible3
a. every portion of the property is answerable for the whole obligation
b. when several things are pledged or mortgaged, all of them are liable for
the totality of the debt. ,reditor does not have to divide his action by
distributing the debt, among the various things pledged or mortgaged
c. the debtor6s heir who has paid a part of the debt cannot as4 for the
proportionate extinction of the pledge or mortgage nor can the creditor6s
heir who has received his share of the debt return the pledge or cancel
the mortgages if the debt is not yet completely satisfied
d. 78,7-'51/2 to the rule of 5/.5!52595#5':3
i. where each one of several things guarantees determinate portion of
credit
ii. where only portion of loan was released
iii. where there was failure of consideration
3. rule that real property, consisting of several lots should be sold separately,
applies to sales in execution, and not to foreclosure of mortgages
4. the mere embodiment of a real estate mortgage and a chattel mortgage in one
document does not have the effect of fusing both securities into an indivisible
whole
3
SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
. contract of pledge or mortgage may secure all 4inds of obligation, be they pure or
sub%ect to a suspensive or resolutory condition
). a promise to constitute pledge or mortgage creates no real right, only a personal
right biding upon the parties, only right of action to compel the fulfillment of the
promise but there is no pledge or mortgage yet
*. under 0-,, estafa is committed by a person who, pretending to be the owner of
any real property, shall convey, sell, encumber or mortgage the same 4nowing
that the real property is encumbered shall dispose of the same as
unencumbered. 5t is essential that fraud or deceit be practiced upon the vendee
at the time of the sale.
PROVISIONS APPLICABLE ONLY TO PLEDGE
1. transfer of possession to the creditor or to third person by common agreement is
essential in pledge
- A,';A# .7#5!70: is important
- ,1/2'0;,'5!7 delivery or symbolic delivery of the 4ey to the
warehouse is sufficient to show that the depositary appointed by common
consent of the parties was legally placed in possession.
2. all movables within commerce of men may be pledged as long as susceptible of
possession
3. incorporeal right, evidenced by3
a. negotiable instruments<
b. bills of lading<
c. shares of stoc4<
d. bonds<
e. warehouse receipts <and
f. similar documents
may be pledged. 'he instruments pledged shall be delivered to the creditor
and if negotiable, must be indorsed.
4. pledge shall ta4e effect against 3
rd
persons only if the ff appears in a public
instrument3
a. description of the thing pledged
b. date of the pledge
. thing pledged may be alienated by the pledgor or owner only if with the consent
of the pledgee. 1wnership of the thing pledged is transmitted to the vendee or
transferee as soon as the pledgee consents to the alienation, butt he latter shall
continue in possession
). contract of pledge gives right to the creditor to retain the thing in his possession
or in that of a third person to whim it has been delivered, until the debt is paid
7. creditor :
a. shall ta4e care of the thing pledged with the diligence of a good father of a
family.
b. has the right to the reimbursement of the expenses made for its
preservation is liable for its loss or deterioration by reason of fraud,
negligence, delay or violation of the terms of the contract, and not due to
fortuitous event
c. may bring the actions which pertain to the owner of the thing in order to
recover it from, or defend it against a 3
rd
person
d. cannot use the thing without the authority of the owner, and if he should
do so, or misuse the thing, the owner may as4 that it be %udicially or
extra%udicially deposited.
e. may use the thing if it is necessary for the preservation of the thing
f. may either claim another thing in pledge or demand immediate payment
of the principal obligation if he is deceived on the substance or (uality of
the thing.
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SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
8. pledgee:
a. cannot deposit the thing pledged with a third person, unless there is a
stipulation authorizing him to do so
b. is responsible for the acts of his agents or employees with respect to the
thing pledged
c. has no right to use the thing or to appropriate the fruits without the
authority of the owner can apply the fruits, income , dividends or interest
earned or produced by the thing pledged to the payment of the interest,
and thereafter to the principal of his credit. ;nless there is stipulation to
the contrary, the interest and earnings of the right pledged and in case of
animals, their offsprings are included in the pledge.
d. may cause public sale of the thing pledged if, without fault on his part,
there is danger of destruction, impairment or dimunition in value of the
thing. 'he proceeds of the auction shall be a security for the principal
obligation.
9. pledgor :
a. has the responsibility for flaws of the thing pledged.
b. cannot as4 for the return of the thing against the will of the creditor, unless
and until he has paid the debt and its interest, with expenses in a proper
case
c. is allowed to substitute the thing which is in danger of destruction or
impairment without any fault on the part of the pledgee, with another thing
of the same 4ind and (uality
d. may re(uire that the thing be deposited with a 3
rd
person if through the
negligence or wilfull act of the pledgee the thing is in danger of being lost
or impaired
E1t"#+)"%./#t $! P'd+
5f the thing pledged is returned by the pledgee to the pledgor or owner, pledge is
extinguished
A statement in writing by the pledgee that he renounces or abandons the pledge
is sufficient to extinguish. =or t his purpose, neither the acceptance by the
pledgor o owner, nor the return of the thing pledged is necessary, the pledgee
becoming a depositary.
5f subse(uent to the perfection of the pledge, the thing is in the possession of the
pledgor or owner, there is prima facie presumption that the thing has been
returned by the pledgee
5f the thing is in the possession of 3
rd
person who has received it from the pledgor
or owner after the constitution of the pledge, there is prima facie presumption that
the thing has been returned by the pledgee.
2$r/&'"t"% r()"rd S&' 34 & Crd"t$r "! *rd"t #$t 0&"d "# d) t"/-
1. the debt is due and unpaid
2. the sale must be at a public auction
3. there must be notice to the pledgor and owner, stating the amount due, and
4. the sale must be made with the intervention of a notary public the th
'he pledgee may appropriate the thing if after the first and second
auctions, the thing is not sold.
At the public auction, the pledgor or owner may bid.
-ledgor or owner shall have a better right if he should offer the same
terms as the highest bidder
-ledgee may also bid, but his offer shall not be valid if he is the only
bidder. All bids at the public auction shall ofer to pay the purchase price at
once. 95.2 >;2' 97 =10 ,A2?. 5f any other bid is accepted, the
pledgee is deemed to have received the purchase price, as far as the
pledgor or owner is concerned.

SECURI TY TRANSACTI ONS

MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
E!!*t $! t. S&' $! t. t."#+ 0'd+d
1. extinguishes the principal obligation whether the price of the sale is more or less
than the amount due
2. if the price is more than amount due, the debtor is not entitled to the excess
unless the contrary is provided
3. if the price of the sale is less, neither is the creditor entitled to recover the
deficiency. ,ontrary stipulation is void.
After public auction, the pledgee shall promptly advise the pledgor or owner of the
result.
Any third person who has any right in the thing may satisfy the principal obligation as
soon as the latter becomes due and demandable
'he right of choice given to the pledgee as to which of the things pledged he shall
cause to be sold is limited only by stipulation. After sufficient property has been sold
to satisfy the obligation plus interest and expenses, no more shall be sold.
A 3
rd
person who is not a party to the principal obligation may secure the latter by
pledging his own property. ?e has the same as a guarantor and he cannot be
pre%udiced by any waiver of defense by the principal obligor
L+&' P'd+%-
1. /ecessary expenses shall be refunded to every possessor, but only possessor
in good faith may retain the thing until he has been reimbursed
;seful expenses shall be refunded only to the possessor 5 n good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have ac(uired and by reason thereof @art
4)A
2. ?e who has executed wor4 upon a movable has a right to retain it by way of
pledge until he is paid. @art 1*31A
3. 'he agent may retain the things which are the ob%ects of agency until the
principal effects the reimbursement and pays the indemnity. @art 1B14A
4. 'he laborer6s wages shall be a lien on the goods manufactured or the wor4 done
@art 1*C*A
2pecial #aws apply to pawnshops and establishment which are engaged in ma4ing
loans secured by pledges. -rovisions of the ,ivil ,ode shall apply subsidiarily.

REAL MORTGAGE (Art%5 2126-2131) - 5t is a contract whereby the debtor secures to
the creditor the fulfillment of a principal obligation, specially sub%ecting to such
security immovable property or real rights over immovable property in case the
principal obligation is not complied with at the time stipulated.
O37*t% $! R&' M$rt+&+
1. immovables
2. alienable real rights in accordance with the laws, imposed upon immovables
* future property cannot be object of mortgage
I/0$rt&#t P$"#t%-
1. As a general rule, the mortgagor retains possession of the property he may
deliver said property to the mortgagee without altering the nature of the contract
of mortgage.
2. 5t is not an essential re(uisite that the principal of the credit bears interest, or that
the interest as compensation for the use of the principal and the en%oyment of its
fruits be in the form of a certain percent thereof.
)
SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
,"#d% $! M$rt&+&+-
1. voluntary
2. legal
3. e(uitable " one which, although it lac4s the proper formalities of a mortgage
shows the intention of the parties to ma4e the property as a security for a debt
@provisions governing e(uitable mortgage $ arts 13), 14C, 144, 1)C2, 1)C3,
1)C4 and 1)C*A
E%%#t"&' R()"%"t% $! M$rt+&+
1. constituted to secure the fulfillment of a principal obligation
2. pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged
3. the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the
purpose
4. cannot exist without a valid obligation
. when the principal obligation becomes due, the thing in which the pledge or
mortgage consists may be alienated for the payment to the creditor.
). appears in a public document duly recorded in the 0egistry of -roperty to be
validly constituted
*legal mortgage the persons in hose fa!or the la establishes a
mortgage ha!e on other right than to demand the e"ecution and the
recording of the document in hich the mortgage is formali#ed.
I#*"d#t% $! R+"%tr&t"$# $! M$rt+&+
1. >ortgagee entitled to registration of mortgage as a matter of right
2. -roceedings for registration do not determine validity of mortgage or its effect
3. 0egistration is without pre%udice to better right of third parties
4. >ortgage deed once duly registered forms part of the records for the registration
of the property mortgaged
. >ortgage by surviving spouse of hisDher undivided share of con%ugal property can
be registered
E!!*t $! I#8&'"d"t4 $! M$rt+&+ $# 0r"#*"0&' $3'"+&t"$#-
1. principal obligation remains valid
2. mortgage deed remains as evidence of a personal obligation
E!!*t $! M$rt+&+-
1. creates real rights, a lien inseparable from the property mortgaged, enforceable
against the whole world
2. creates merely an encumbrance
E1t#t $! M$rt+&+
a. the natural accessions
b. to the improvements,
c. growing fruits
d. the rents or income not yet received when the obligation becomes due,
e. to the amount of the indemnity granted or owing to the proprietor from the
insurers of the property,
f. in virtue of expropriation for public use, with the declarations,
amplifications and limitations established by law, whether the estate
remains in the possession of the mortgagor, or it passes into the hands of
a third person.
I/0$rt&#t P$"#t%-
1. 2tipulation in mortgage contract including after$ac(uired properties is valid.
2. Attachment of lien is retroactive
3. 2tipulation is necessary for mortgage to secure future advancements
4. >ortgage is a continuing security until the full amount of advances are paid.
*
SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
. >ortgage credit may be alienated or assigned to a third person, in whole or in
part, with the formalities re(uired by law.
a. Alienation or assignment is valid even if not registered. 0egistration is
necessary only to affect 3
rd
persons.
). ,reditor may claim from a 3
rd
person in possession of the property the payment
of the part of the credit secured by the property
*. 2tipulation forbidding the owner from alienating the immovable mortgaged shall
be void.
L&9% +$8r#"#+ M$rt+&+-
1. /ew ,ivil ,ode
2. -. 1B2
3. 0evised Administrative ,ode
4. 0A 4++2 , as regards aliens becoming mortgages
2$r*'$%)r $! M$rt+&+ - 5t is the remedy available to the mortgagee by which he
sub%ects the mortgaged property to the satisfaction of the obligation to secure
which the mortgage was given.
,"#d% $! 2$r*'$%)r
1. %udicial
2. extra%udicial
both should be distinguished from execution sale which is governed by
0ule 3B of the 0ules of ,ourt
:)d"*"&' 2$r*'$%)r
@governed by 0ule )+ of 0ules of ,ourtA
1. >ay be availed of by bringing an action in the proper court which has %urisdiction
over the area wherein the real property involved or apportion thereof is situated
2. 5f the court finds the complaint to be well$founded, it shall order the mortgagor to
pay the amount due with interest and other charges within a period of not less
than BC days nor more than 12C days from the entry of %udgment.
3. 5f the mortgagor fails to pay at time directed, the court, upon motion, shall order
the property to be sold to the highest bidder at a public auction.
4. ;pon confirmation of the sale by the court, also upon motion, it shall operates to
divest the rights of all parties to the action and to vest their rights to the
purchaser sub%ect to such rights of redemption as may be allowed by law
. 9efore the confirmation, the court retains control of the proceedings.
). 'he proceeds of the sale shall be applied to the payment of the3
a. ,osts of the sale<
b. Amount due the mortgagee<
c. ,laims of %unior encumbrancers or persons holding subse(uent
mortgages in the order of their priority< and
d. the balance, if any shall be paid to the mortgagor
*. 2heriff6s certificate is executed, ac4nowledged and recorded to complete the
foreclosure
N&t)r $! :)d"*"&' 2$r*'$%)r Pr$*d"#+%-
1. (uasi in rem action
2. foreclosure is only the result or incident of the failure to pay debt
3. survives death of mortgagor
E1tr&7)d"*"&' 2$r*'$%)r
@governed by Act /o, 313, as amendedA
1. express authority to sell is given to the mortgagee.
2. authority is not extinguished by death of mortgagor or mortgagee
3. public sale should be made after proper notice
4. surplus proceeds of foreclosure sale belong to the mortgagor
+
SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
. debtor has the right to redeem the property sold within 1 year from and after the
date of sale
). remedy of party aggrieved by foreclosure is a petition to set aside sale and
cancellation of writ of possession.
R"+.t $! M$rt+&+ t$ r*$8r d!"*"#*4
1. >ortgagee is entitled to recover deficiency
2. 5f the deficiency is embodied in a %udgment, it is referred to as deficiency
judgment.
3. Action for recovery of deficiency may be filed even during redemption period.
4. Action to recover prescribes after 1C years from the time the right of action
accrues
N&t)r $! P$9r $! !$r*'$%)r 34 1tr&7)d"*"&' %&'
1. conferred for mortgagee6s protection
2. an ancillary stipulation
3. a prerogative of the mortgagee
$ote: %tipulation of upset price in mortgage contract is !oid
E!!*t $! "#&d()&*4 $! 0r"* "# !$r*'$%)r %&'
1. Ehere there is right to redeem
a. GR3 5nade(uacy of price is immaterial because the %udgment debtor may
redeem the property
b. EXCEPTI!3 the price is so inade(uate as to shoc4 the conscience of
the court ta4ing into consideration the peculiar circumstances
2. -roperty may be sold for less than its fair mar4et value upon the theory that the
lesser the price the easier for the owner to redeem.
3. 'he value of the mortgaged property has no bearing on the bid price at the public
auction, provided that the public auction was regularly and honestly conducted.
;&"8r $! %*)r"t4 34 *rd"t$r
1. >ortgagee may waive right to foreclose his mortgage and maintain a personal
action for recovery of theindebetness.
2. >ortgagee cannot have both remedies
$ote: &oreclosure retroacts to the date of registration of mortgage
Rd/0t"$# $ 5t is a transaction by which the mortgagor reac(uires the property which
may have passed under the mortgage or divests the property of the lien which the
mortgage may have created.
,"#d% $! Rd/0t"$#
15 ()"t4 $! rd/0t"$#
- right of the mortgagor to redeem the mortgaged property after his default in
the performance of the conditions of the mortgage but before the sale of
the mortgaged property or confirmation of sale
25 r"+.t $! rd/0t"$#
- right of the mortgagor to redeem the property within a certain period after it
was sold for the satisfaction of the debt.
E()"t4 $! Rd/0t"$#
1. exercised before confirmation of sale
2. second mortgagee ac(uires only the e(uity of redemption vested in the
mortgagor
3. ta4ing physical possession not necessary for levy
4. can be levied upon by means of writ of execution
B
SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
. remedy of mortgagee to obtain possession is to bring a civil action either to
recover possession as a preliminary step to the sale or to obtain %udicial
foreclosure
R"+.t $! Rd/0t"$#
". may be exercised within 1 year from and after the date of registration of the
certificate of sale with the appropriate 0egistry of .eeds.
#. if no redemption is made within prescribed period, the purchaser has the
absolute right to a writ of possession which is the final process to consummate
extra%udicial foreclosure
$. effect of seasonable redemption is not to recover ownership which was never lost
but the elimination from his title the lien created by the levy or attachment.
%. sale by the mortgagor to a 3
rd
person during redemption period transfers only the
right to redeem the property and the right to possess, use and en%oy the same
during said period.
&. if sale to a 3
rd
person is not registered and made without the consent of the
mortagee, buyer was not validly substituted as a debtor thus has no right to
redeem
'. if extra%udicial foreclosure if effected with fraud, it is null nad void a( initio.
C<ATTEL MORTGAGE @Arts. 214C$2141A $ 5t is a contract by virtue of which a personal
property is recorded in the ,hattel >ortgage 0egister as security for the performance of
an obligation.
$ote: 'f the mo!able( instead of being recorded is deli!ered to the
creditor( it is pledge and not chattel mortgage.
C<ATTEL MORTGAGE PLEDGE
5nvolves movable property 5nvolves movable property
.elivery of the personal property is /1'
necessary
.elivery of the personal property is
necessary
0egistration is necessary for validity 0egistration is /1' necessary for validity
-rocedure 3 2ec 14 of Act no 1C+, as
amended
-rocedure3 Art 2112 of ,ivil ,ode
5f the property is foreclosed, the excess
over the amount due goes to the debtor
5f the property is sold, the debtor is not
entitled to the to the excess ;/#722 it is
otherwise agreed or in case of legal
pledge
,reditor is entitled to deficiency from the
debtor 78,7-' if it is a security for the
purchase of personal property in
installments
,reditor is not entitled to recover deficiency
notwithstanding any stipulation to the
contrary
L&9% +$8r#"#+ C.&tt' M$rt+&+-
1. ,hattel >ortgage #aw, Act /o. 1C+, as amended
2. ,ivil ,ode
3. 0evised Administrative ,ode
4. 0evised -enal ,ode
. 2hip >ortgage .ecree of 1B*+ @-. 121A governs mortgage of vessels of
domestic ownership
I/0$rt&#t 0$"#t%-
)he pro!isions of *i!il *ode on pledge shall be applicable to chattel
mortgage only insofar as they are not in conflict ith the *hattel +ortgage
,a
%ubject matter of *hattel mortgage must be described and identified.
1C
SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
-"tent of *hattel +ortgage . 't is deemed to co!er only the property
described and not li/e or substituted property thereafter ac0uired by the
mortgagor and placed in the same depositary as the property originally
mortgaged( anything in the mortgage to the contrary notithstanding
E!!*t $! R+"%tr&t"$#
1. creates real rights
2. adds nothing to mortgage
$ote: 1egistration of assignment of mortgage is not re0uired
R"+.t $! Rd/0t"$#
1. when the condition of a chattel mortgage is bro4en, the ff may redeem3
a. mortgagor<
b. person holding a subse(uent mortgage<
c. subse(uent attaching creditor.
2. an attaching creditor who so redeems shall be subrogated to the rights of the
mortgagee and entitled to foreclose the mortgage in the same manner that the
mortgagee could foreclose it
3. the redemption is made by paying or delivering o the mortgagee the amount due
on such mortgage and the costs and expenses incurred by such breach of
condition before the sale
2$r*'$%)r $! C.&tt' M$rt+&+
1. public sale
2. private sale " there is nothing illegal, immoral or against public order in an
agreement for the private sale of the personal properties covered by chattel
mortgage
Pr"$d t$ 2$r*'$%
1. After 3C days from the time of the condition is bro4en
2. 'he 3C$day period is the minimum period after violation of the mortgage condition
for the creditor to cause the sale at public auction with at least 1C days notice to
the mortgagor and posting of public notice of time, place, and purpose of such
sale, and is a period of grace for the mortgagor, to discharge the obligation.
3. After the sale at public auction, the right of redemption is no longer available to
the mortgagor
C"8"' A*t"$# t$ r*$8r *rd"t
1. independent action not re(uired
2. mortgage lien deemed abandoned by obtaining a personal %udgment
R"+.t $! M$rt+&+ t$ r*$8r D!"*"#*4
1. where mortgage foreclosed
$ creditor may maintain action for deficiency although ,hattel >ortgage #aw
is silent on this point. 0eason is chattel mortgage is only given as a security
and not as payment of the debt.
2. where mortgage constituted as security for purchase of personal property
payable in installments
$ no deficiency %udgment can be as4ed and any agreement to the contrary
shall be void
3. where mortgaged property subse(uently attached and sold
$ mortgagee is entitle to deficiency %udgment in an action for specific
performance
A00'"*&t"$# $! 0r$*d% $! %&'
1. costs and expenses of 4eeping and sale
2. payment of the obligation
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MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
3. claims of persons holding subse(uent mortgages in their order
4. balance, if any, shall be paid to the mortgagor, or person holding under him
CONCURRENCE AND PRE2ERENCE O2 CREDITS @Arts. 223)$221A "
C$#*)rr#* $! *rd"t $ 5t implies possession by two or more creditors of e(ual right or
privileges over the same property or all of the property of a debtor
Pr!r#* $! Crd"t $ 5t is the right held by a creditor to be preferred in the payment of
his claim above other out of the debtor6s assets
G#r&' Pr$8"%"$#%-
1. the debtor is liable with all his property, present and future, for the fulfillment of
his obligations, sub%ects to exemptions provided by law
- exempt property3
a. present property
1. family home @Arts 12, 13 F 1, /,,A
2. right to receive support as well as money or property
obtained by such support shall not be levied upon on
attachment or execution @Art 2C, /,,A
3. 2ec 13, 0ule 3B, 0ules of ,ourt
4. 2ec 11+, the public #and Act,@ ,A /o. 141, as amendedA
b. future property
$ a debtor who obtains a discharge from his debts on account
of insolvency, is not liable for the unsatisfied claims of his
creditors with said property @2ecs. )+ F )B, 5nsolvency #aw,
Act /o. 1B)
c. property in custodia legis and of public dominion
2. insolvency shall be governed by the 5nsolvency #ae @Act /o. 1B), as amendedA
3. 7xemption of con%ugal property or absolute community or property provided that3
a. -artnership or community subsists
b. 1bligations of the insolvent spouse have not redounded to the benefit of
the family
4. if there is co$ownership, and one of the co$owners is the insolvent debtor, his
undivided share or interest in the property shall be possessed by the assignee in
insolvency proceedings because it is part of his assets
. property held by the insolvent debtor as a trustee of an express or implied trust,
shall be excluded from the insolvency proceedings
C'&%%"!"*&t"$# $! Crd"t%
1. special preferred credits @Arts 2241 F 2242 of /,,A
a. considered as mortgages or pledges of real or
personal property or liens within the purview of legal provisions governing
insolvency
b. taxes due to the 2tate shall first be satisfied
2.ordinary preferred credits @Art 2244A
$ preferred in the order given by law
3.common credits @Art 224A
- credits of any other 4ind or class, or by any other right or title not comprised
in Arts 2241$2244 shall en%oy no preference
Ordr $! Pr!r#* $! Crd"t
a. credits which en%oy preference with respect to specific movables, exclude all
others to the extent of the value of the personal property to which the preference
refers.
b. if there are 2 or more credits with respect to the same specific movable property,
they shall be satisfied pro rata, after the payment of duties, taxes and fees due
the 2tate or any subdivision thereof
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SECURI TY TRANSACTI ONS
MEMORY AID
ATENEO CENTRAL BAR OPERATIONS 2001
c. those credits which en%oy preference in relation to specific real property or real
rights, exclude all others to the extent of the value of the immovable or real right
to which the preference refers.
d. if there are 2 or more credits with respect to the same specific real property or
real rights, they shall be satisfied pro rata, after the payment of the taxes and
assessment of the taxes and assessments upon the immovable property or real
right.
e. the excess, if any, after the payment of the credits which en%oy preference with
respect to specific property, real or personal, shall be added to the free property
which the debtor may have, for the payment of other credits.
f. those credits which do not en%oy any preference with respect to specific property,
and those which en%oy preference, as to the amount not paid, shall be satisfied
according to the following rules3
- order established by Art 2244
- common credits referred to in Art 224 shall be paid pro rata regardless of
dates.