CREDIT TRANSACTIONS Credit transactions include all transactions involving the purchase of loan of goods, services or money in the

present with a promise to pay or deliver in the future. Without a promise to pay or deliver in the future, there can be no security transaction. Credit transactions main focus is on loan, as such being a loan, it can either be unsecured (guaranty and surety) and secured (pledge,mortgage and antichresis) Parties to a Bailment. Bailor (Comodatario) the giver, the party who delivers the possession or custody of the thing bailed. 200 notes! the one who lends, he need not be the owner as long as he has possessory right over the property (li"e a lessee or a usufructuary) Bailee (Comodante) the recipient# the party who receives the possession or custody of the thing thus delivered. Kinds of Bailment Contract. $.Those for the sole benefit of the bailor. $.$ gratuitous deposit $.2 mandatum 2.Those for the sole benefit of the bailee 2.$ commodatun 2.2 gratuitous mutuum %. Those for the benefit of both parties %.$ deposit for the compensation# involuntary deposit %.2 pledge %.% bailments for hire b. 5&6 ! 1espite bailor7s(the giver) demand, the bailee continuously refuses to return the cow on the ground that he was not yet reimbursed by the bailor of the value of the feeds consumed by the said cow and li"ewise, there was no period specified for the return of the same. 8/.1! contention of bailee is erroneous. .aw provides that 9bailee cannot retain the thing loaned on the ground that the bailor owes him something, even though it may be by reason of e2penses.: &nd li"ewise, where there is no stipulated period or duration of the contract, the same is "nown as ;6/C&6,<= and the bailor may demand the thing at will.

5&6! 1ue to the re3uest of the parish priest, 1on >uan lend his %0 person capacity boat to be used for the fluvial procession. <nfortunately, the said boat loaded with a hundred devotees was smashed by big waves during the said procession and capsi4ed .0ome of them were drowned. 1on >uan is as"ing your legal opinion as to! a. whether he could demand reimbursement for the e2penses incurred to refloat the said boat from the parish priest?@/0, e2penses incurred in refloating the said boat is considered as an e2pense for the preservation ,then, law provides that 9bailee is obliged to pay for the ordinary e2penses for the use and preservation of the thing loaned.: Whether the parish priest be held liable for the death of some of the devotees?-A, ;arish priest is not liable for the death of some of the devotees since law provides that 9-o person is responsible for those event which were unforeseen , or even though foreseen were inevitable.: (sa totoo lang, (5.</ 'B is not sure with regard this answerC)

Loan in General Characteristics of the Contract $.Real Contract because the delivery of the thing loaned is necessary for the perfection of the contract (&rticle $'%(# see also &rticle $%$ )# and 2.Unilateral Contract because once the sub)ect matter has been delivered, it creates obligations on the part of only one of the parties, i. e. the borrower Kinds of Loan $.Commodatum where the bailor (lender) delivers to the bailee (borrower) a non*consumable thing so that the latter may use it for a certain time and return the identical thing# and 200 notes!use lang (fruits not included but parties may stipulate to include it) 200 notes!+his is loan for non*consummable. ,t can be ordinary or precarium (no stipulation as to duration and is tolerated by owner). -o payment while borrowing, if there is payment then it is ./&0/. 200 notes!1eath of either parties e2tinguishes it. 2.Mutuum where the bailor (lender) delivers to the bailee (borrower) money or other consumable thing upon the condition that the latter shall pay same amount of the same "ind of 3uality. 200 notes!not gratuitous, it has no obligation to return the same thing. 200 notes!it has no interest co4 if there is then it is onerous mutuum 200 notes!ownership passes to borrower. ,t is personal.

5&6! Contract of lease was entered into by and between DE@ over a house belonging to D.&fter a period of B yrs, @ discovered that the land belongs to the 0tate hence @ refused to pay his rentals contending that D is not entitled to the rentals. 8e furthered as" for reimbursement of previous rentals. ,s contention of @ correct?-A, since a lessee or bailee is estopped from asserting title to the thing leased or received, as against the lessor or bailor. 8e cannot 3uestion the title of the lessor since he is estopped from doing so.

CO

ODAT!

C. O#li$ations of Bailor $. +o allow the bailee the use of the thing loaned for the duration of period stipulated or until the accomplishment of the purpose for which commodatum was constituted. Exceptions! a.urgent need during which time the commodatum is suspended. b.precarium b.$if duration of the contract has not been stipulated b.2if use or purpose of the thing has not been stipulated b.%if use of thing is merely tolerated by the bailor 2. +o refund e2traordinary e2penses for the preservation of the thing loaned provided bailor is notified before the e2penses were incurred. Exception! urgent need hence no notice is necessary. %. +o refund B0J of the e2traordinary e2penses arising from actual use of the thing loaned (i.e. caused by fortuitous event) Exception! contrary stipulation (. +o pay damages to bailee for "nown hidden flaws in the thing loaned. Note! $.5ailor has the right to demand return of the thing if bailee commits any act of ingratitude. D.Recent ()ris'r)dence on Commodat)m Catholic icar !postolic of the Mountain "rovince vs# Court of !ppeals ($ B 0C6& B$B) ;rivate respondents were able to prove that their predecessors7 house was borrowed by petitioner Kicar after the church and the convent were destroyed. +hey never as"ed for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner the bailee. +he bailee7s failure to return the sub)ect matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. +he bailee held in trust the property sub)ect matter of commodatum. +he adverse claim of petitioner came only in $'B$ when it declared the lots for ta2ation purposes. +he action of petitioner Kicar by such adverse claim could not ripen into title by way of ordinary ac3uisitive prescription because of the absence of )ust title.

A. C"aracteristics $.Gratuitous, otherwise it is a lease (&rticle $'%B) 2. ;urpose is the temporary use of the thing loaned (&rticle $'%B) %. 5ailee7s right to use is limited to the thing loaned and not to its fruits (&rticle $'%B) unless there is stipulation to the contrary (&rticle $'(0) (. 0ub)ect matter is generally non-consumable things but may cover consumables if the purpose of the contract is for e2hibition. B.5ailor need not to be the owner# it is sufficient that he has possessory interest over sub)ect matter (&rticle $'%F). . Commodatum is purely personal in character hence death of either bailor or bailee e2tinguishes the contract (&rticle $'%') G. General Rule: 5ailee can neither lend nor lease the ob)ect of the contract to a third person. Exception!=ember of bailee7s household Exception to the exception! *contrary stipulation *nature of thing forbids such use

B.O#li$ations of t"e Bailee $. 5ailee is liable for ordinary e2penses for the use and preservation of the thing loaned. (5ailee pay but sub)ect to reimbursement) 2. General Rule:5ailee is not liable for loss or damage due to a fortuitous event (because the bailor retains ownership) Exceptions: a)5ailee devote thing to a different purpose b)5ailee "eeps thing longer than the period stipulated or after the accomplishment of the use for which commodatum was constituted. c)+hing loaned was delivered with &;;6&,0&. of its value (unless there is e2press stipulation to the contrary) d)5ailee lends thing to a third person not a member of his household e)5ailee, if being able to save either the thing borrowed or his own thing chose to save the latter %.5ailees are solidarily liable when the thing is loaned to two or more bailees in the same contract. Note: $. G.R.%5ailee is not liable for ordinary wear and tear due to use of the thing loaned. E&ce'tions! a.) ,f he is guilty of fault or negligence b.) ,f he devotes thing to any purpose different from that for which it has been loaned. 2. 5ailee cannot retain the thing loaned as security for claims he has against the bailor, even though by reason of e2traordinary e2penses. 200 notes! /2traordinary e2pense (wHo fault of bailee li"e tire is flat) Ibailor and bailee pay e3ually 200 notes!ornamental (pinturahan pero o" pa) bailee pay wH no reimbursement

SI PLE LOAN OR

!T!!

E.Recent ()ris'r)dence on

)t))m +Loan)

A. Definition Mutuum is a contract whereby one of the parties delivers to another party money or other consumable thing with the understanding that the same amount of the same "ind and 3uality shall be paid. B.C"aracteristics $.5orrower ac3uires ownership of the thing and can therefore dispose of the thing borrowed. +here is no criminal liability for failure to pay one7s debt. 2.,f the thing loaned is money, payment must be made in the currency which is legal tender in the ;hilippines and in case of e2traordinary deflation or inflation, the basis of payment shall be the value of the currency at the time of the creation of the obligation. %.,f fungible thing was loaned, the borrower is obliged to pay the lender another thing of the same "ind, 3uality and 3uantity.

*rancisco vs# Gregorio($$B 0C6& %'() -o interest is due where there was tender of payment prior to demand to pay or perform an agreed act. & debtor cannot be considered in delay who offered a chec" bac"ed by sufficient deposit or ready to pay cash if the creditor chose that means of payment. )tate %nvestment +ouse vs# Court of !ppeals ($'F 0C6& %'0) +he appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money, is the payment of the penalty interest at the rate agreed upon# and in the absence of a stipulation of a particular rate of penalty interest, then the payment of additional interest at a rate e3ual to the regular monetary interest, and if no regular interest had been agreed upon, then payment of legal interest. Tio ,he Chio vs# Court of !ppeals(202 0C6& $$') Circular -o. ($ of the Central 5an" which too" effect on >uly 2', $'G( pursuant to ;residential 1ecree -o. $$ (<sury .aw) raised the legal rate of interest from si2 ( J) percent to twelve ($2J) percent. +he ad)usted rate mentioned in the circular refers only to loans or forbearances of money, goods or credits and court )udgments thereon but not to court )udgments for damages arising from in)ury to persons and loss of property which does not involve a loan. ,n the case of "hilippine Rabbit -us 'ines$ %nc# vs# Cru. , L.6. -o. G$0$G, >uly 2F, $'F , $(% 0C6& $BF, the Court declared that the legal rate of interest is si2 ( J) percent per annum and not twelve ($2J) percent, where a )udgment award is based on an action for damages for personal in)ury, not use or forbearance of money, goods or credit. ,n the same vein, the Court held in G)%) vs# Court of !ppeals, L.6. -o. B2(GF, Actober %0, $'F , $(B 0C6& %$$, that the rates under the <sury .aw (amended by ;. 1. $$ ) are applicable only to interest by way of compensation for the use or forbearance of money# interest by way of damages is governed by &rticle 220' of the Civil Code.

C.Distinctions #et*een

)t))m +!tan$) and Lease +!'a)

$.,n mutuum$ the ob)ect is money or any consumable (fungible) thing, whereas in lease$ the ob)ect may be any thing, whether movable or immovable, fungible or nonfungible. 2. ,n mutuum, the thing loaned becomes the property of the debtor, whereas in lease, the owner does not lose his right of ownership. %. ,n mutuum$ the relationship which is created is that of creditor and debtor, whereas in lease, the relationship that is created is that of landlord and tenant or lessor and lessee (+olentino vs. Lon4ales, B0 ;hil. BBF).

D. R)les on Interest $.%n order that interest may be charged$ it must be expressly stipulated in &riting (&rticle $'B ). Exceptions: $.1ebtor in delay is liable to pay legal interest as indemnity for damages even in the absence of stipulation for the payment of interest (&rticle 220') a.,n a loan, the interest due should be that stipulated in writing and in the absence thereof, the rate shall be $2J per annum. b.,n case of other obligations, interest on the amount of damages may be imposed at the court7s discretion at the rate of J per annum. ;residential 1ecree -o. $ F( and C5 Circular -o. '0B did not authori4e either party to unilaterally raise the interest rate without the other7s consent. +hat there is no longer any ceiling on interest or interest rates on loans ('iam 'a& vs# (lympic )a&mill Co., $2' 0C6& (%' M$'F(N) applies only where the parties openly and e2pressly agree on a specific rate of interest to accrue on the loan. Where the interest rate is not e2pressly stipulated, the loan shall earn $2J interest per annum. 2.,nterest due shall earn interest (compounding interest) from the time it is )udicially demanded although the obligation may be silent upon this point (&rticle 22$2) or when there is e2press stipulation (&rticle $'B').

,t is the rule that escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money on long term contracts. 8owever, the enforcement of such stipulations are sub)ect to certain conditions.&n escalation clause can be valid only if it also includes a de*escalation clause or a stipulation that the rate of interest agreed upon shall be reduced in the event that the ma2imum rate of interest is reduced by law or by =onetary 5oard. &n escalation clause must be bilateral hence it must provide for reduction or de*esclation of interest for said clause to be valid.

T"e #indin$ effect of an, a$reement #et*een 'arties to a contract is 'remised on t*o settled 'rinci'les+.) that any obligation arising from contract has the force of law between the parties# and +/) that there must be mutuality between the parties based on their essential e3uality. &ny contract which appears to be heavily weighed in favor of one of the parties so as to lead to an unconscionable result is void. &ny stipulation regarding the validity or compliance of the contract which is left solely to the will of one of the parties is li"ewise invalid. =oreover, respondent ban"7s reliance on C. 5. Circular -o. '0B, 0eries of $'F2 did not authori4e the ban", or any lending institution for that matter, to progressively increase interest rates on borrowings to an e2tent which would have made it virtually impossible for debtors to comply with their own obligations. +rue, escalation clauses in credit agreements are perfectly valid and do not contravene public policy. 0uch clauses, however, (as are stipulations in other contract) are nonetheless still sub)ect to laws and provisions governing agreements between parties, which agreement while they may be the law between the contracting parties*implicitly incorporate provisions of e2isting law. Conse3uently, while the <sury .aw ceiling on interest rates was lifted by C. 5. Circular -o. '0B, nothing in the said circular could possibly be read as granting respondent ban" carte blanche authority to raise interest rates to levels which would either enslave its borrowers or lead to a hemorrhaging of their assets. /scalation clauses are not basically wrong or legally ob)ectionable so long as they are not solely potestative, but based on reasonable and valid grounds. 8ere, as clearly demonstrated above, not only (are) the increases of the interest rates on the basis of the escalation clause patently unreasonable and unconscionable, but also there are no valid and reasonable standards upon which the increases are anchored. "/- vs# Court of !ppeals(2BF 0C6& B(') +o begin with, ;-57s argument rests on a misapprehension of the import of the appellate court7s ruling. +he Court of &ppeals nullified the interest rate increases not because the promissory note did not comply with ;.1. -o. $ F( by providing for a de*escalation, but because the absence of such provision made the clause so one*sided as to ma"e it unreasonable. +hat ruling is correct. ,t is in line with our decision in -anco *ilipino )avings 0 Mortgage -an1 vs# /avarro ($B2 0C6& %(0) that although ;. 1. -o. $ F( is not to be retroactively applied to loans granted before its effectivity there must nevertheless be a de*escalation clause to mitigate the one* sidedness of the escalation clause. ,ndeed because of concern for the une3ual status of borrowers vis*O*vis the ban"s, our cases after 5anco Pilipino have fashioned the rule that any increase in the rate of interest made pursuant to an escalation clause must be the result of agreement between the parties. ,n this case no attempt was made by ;-5 to secure the conformity of private respondents to the successive increases in the interest rate. ;rivate respondents assent to the increases can not be implied from their lac" of response to the letters sent by ;-5, informing them of the increases. Por as stated in one case ("/- vs# C!, 2%F 0C6& 20) M$''(N), no one receiving a proposal to change a contract is obliged to answer the proposal.

'iam 'ao vs# (lympic )a&mill($2' 0C6& (%') <sury is now legally non*e2istent. ,nterest can be charged as lender and borrower may agree upon. +he 6ules of Court in regard to allegations of usury, being procedural in nature, should be considered repealed with retroactive effect. %ssue:,f the debtor is sued by the creditor for the recovery of loan together with interest, does the failure of the creditor to file a reply denying under oath the defense or usury amount to an admission thereof? +eld: -o. ,t is the failure of the creditor to deny under oath in his answer to a complaint filed by the debtor against him for the recovery of usurious interest he has collected that is contemplated by 0ection ' of the <sury .aw as an admission of usury. ,t does not apply to the present case where the creditor is the plaintiff see"ing the recovery of a loan together with interest and the debtor sets up the defense that the transaction is usurious.

,orean !irlines vs# Court of !ppeals(2%( 0C6& G$G) .egal interest of J p.a. on the amount of damages in favor of a litigant should commence from rendition of )udgment of the trial court instead of the date of filing of the complaint.

G!ARANT0 Guaranty is a contract whereby a person binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. C"aracteristics $.accessory 2.subsidiary and conditional %.unilateral (.re3uires that the guarantor must be a person distinct from the debtor R)les Go1ernin$ t"e Nat)re and E&tent of G)arant, $.G.R.*Luaranty is generally gratuitous Exception: contrary stipulation Garcia$ 2r# vs# Court of !ppeals($'$ 0C6& ('%) +he peculiar nature of a guaranty or surety agreement is that it is regarded as valid despite the absence of any direct consideration received by the guarantor or surety either from the principal debtor or from the creditor. While a contract of guaranty or surety, li"e any other contract, must generally be supported by a sufficient consideration, such consideration need not pass directly to the guarantor or surety# a consideration moving to the principal alone will suffice. +he guarantor or surety, therefore, becomes liable for the debt or duty of another although he possesses no direct or personal interest over the obligations nor does he receive any benefit therefrom. 2.Luaranty is an accessory contract therefore there must be a valid principal obligation for guaranty to be valid. Luarantor may secure the performance of voidable, unenforceable, natural, conditional, and future obligations (&rticle 20B2). %.Luarantor7s liability cannot e2ceed the principal obligation (&rticle 20B(). (.Luaranty cannot be presumed. ,f there is any doubt on the terms and conditions of the guaranty or surety agreements, the doubt should be resolved in favor of the guarantor or surety (;hilippine -ational 5an" vs. Court of &ppeals, $'F 0C6& G G). 8owever, the rule of strictissimi )uris commonly refers to an accommodation surety and is not applied in case of compensated sureties. B.+he 3ualifications of a guarantor are! &.8e possesses integrity# 5.8e has capacity to bind himself# and C.8e has sufficient property to answer for the obligation which he guarantees .Where the creditor has re3uired and stipulated that a specified person should be a guarantor, the substitution of guarantor may not be demanded (&rticle 20BG) because in such a case the selection of the guarantor is a term of the agreement and as a party, the creditor, is therefore, bound thereby (see &rticles $$B', $%0 ). 200 notes!if creditor chooses the guarantor,he cannot demand replacement.

Effects of G)arant, #et*een t"e De#tor and t"e G)arantor $.Luaranty is a contract of indemnity. +he guarantor who pays for a debtor must be indemnified by the latter. The indemnity comprises! *the total amount of the debt# *the legal interest thereon from the time the payment was made "nown to the debtor, even though it did not earn interest for the creditor# *+he e2penses incurred by the guarantor after having notified the debtor that payment had been demanded of him# *1amages, if they are due (&rticle 20 ) Exceptions: a.Where the guaranty is constituted without the "nowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor (&rticle 20B0) b.;ayment by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which, however, re3uires the debtor7s consent. 5ut the payment is in any case valid as to the creditor who has accepted it (&rticle $2%F) c.+he right to demand reimbursement is sub)ect to waiver.

2.Luarantor has the right of subrogation against the debtor to enable him to enforce the indemnity granted in &rticle 20 and he cannot demand more than what he actually paid (&rticle 20 G). %.Guarantor has the right to proceed against the debtor even before payment in the follo&ing instances: $.$ $.2 $.% $.( $.B When he is sued for the payment# ,n case of insolvency of the principal debtor# When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has e2pired# When the debt has become demandable by reason of the e2piration of the period for payment# &fter the lapse of ten years, when the principal obligation has no fi2ed period for its maturity, unless it be of such nature that it cannot be e2tinguished e2cept within a period longer than ten years# ,f there are reasonable grounds to fear that the principal debtor intends to abscond# ,f the principal debtor is in imminent danger of becoming insolvent (&rticle 20G$).

$. $.G

Luarantor may either obtain release from the guaranty or demand a security that shall protect him from any proceedings by the creditor and from danger of debtor7s insolvency (&rticle 20G$).

;ayment without notice to debtor, latter will still reimburse if! *gratitous guaranty *guarantor was prevented by fortuitous event from notifying debtor *creditor becomes insolvent

Effects of G)arant, #et*een t"e G)arantor and t"e Creditor $.G.R.*Luarantor has the right to the benefit of e2cussion or e2haustion of the debtor7s property before he can be compelled to pay. E&ce'tions: *if guarantor has e2pressly renounced e2cussion *if guarantor has bound himself solidarily with the debtor (suretyship) *in case of debtor7s insolvency *when guarantor has absconded or cannot be sued within the ;hilippines unless he left a manager or representative *if it may be presumed that an e2ecution on the debtor7s property will not satisfy the obligation *if guarantor does not set up the benefit of e2cussion and fails to point out to the creditor available property of the debtor within the ;hilippines *if he is a )udicial bondsman and sub*surety *where a pledge or mortgage has been given by the guarantor as a special security *if guarantor fails to interpose it as a defense before )udgment is rendered against him (0aavedra vs. ;rice, F ;hil. ')

3illex "lastic %ndustries Corporation vs# Court of !ppeals(2B 0C6& (GF) Wille2 ;lastic argues that the 9Continuing Luaranty:. 5eing an accessory contract, cannot legally e2ist because of the absence of a valid principal obligation. ,ts contention is based on the fact that it is not a party either to the 9Continuing 0urety &greement: or to the loan agreement between =anila 5an" and ,nter*6esin ,ndustrial. ;ut in another way, the consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone being sufficient. Por a 9guarantor or surety is bound by the same consideration that ma"es the contract effective between the principal parties thereto Q. ,t is never necessary that a guarantor or surety should receive any part or benefit, if such there be, accruing to his principal.: 222 Wille2 ;lastic contends that the 9Continuing Luaranty: cannot be retroactively applied so as to secure the payments made by ,nterban" under the two 9Continuing 0urety &greements: and invo"es the /l Kencedor and 1iRo rulings to support its contention that a contract if suretyship or guaranty should be applied prospectively. ,n /l Kencedor vs. Canlas ((( ;hil. ''), we held that a contract of suretyship 9 is not retroactive and no liability attaches for defaults occurring before it is entered into unless an intent to be so liable is indicated.: +here we found nothing in the contract to show that the parties intended the surety bonds to answer for the debt contracted previous to the e2ecution of the bonds. ,n contrast, in this case, the parties to the 9Continuing Luaranty: clearly provided that the guaranty would cover 9sums obtained andHor to be obtained: by ,nter* 6esin ,ndustrial from ,nterban". An the other hand, in 1iRo vs. Court of &ppeals (2$ 0C6& '), the issue was whether the sureties could be held liable for an obligation contracted after the e2ecution of the continuing surety agreement. ,t was held that by its very nature a continuing suretyship contemplates a future course of dealing. 9,t is prospective in its operation and is generally intended to provide security with respect to future transactions.: 5y no means, however, was it meant in that case that in all instances a contract of guaranty or suretyship should be prospective in application. ,ndeed, as we also held in 5an" of the ;hilippine ,slands vs. Poerster ((' ;hil. F(%), although a contract of suretyship is ordinarily not to be construed as retrospective, in the end the intention of the parties as revealed by the evidence is controlling.

2.& compromise between the creditor and the principal debtor benefits the guarantor but does not pre)udice him. & compromise which is entered into between the guarantor and the creditor benefits but does not pre)udice the principal debtor (&rticle 20 %).

%.Luarantor is li"ewise entitled to the benefit of division where there are several guarantors of only one debtor and for the same debt. Luarantor7s liability is only )oint therefore, they are not liable beyond the shares which they are respectively bound to pay (&rticle 20 B). Exceptions: a) solidarity b) if any of the circumstances in &rticle 20BG should ta"e place.

200 notes!,n order for guarantor to ma"e use of e2cussion, he must set it up against the creditor upon the latter7s demand for payment from him and point out to creditor available property of the debtor within the country sufficient to cover the amount of the debt ** creditor who is negligent for not e2hausting shall suffer the loss to the e2tent of said property for the insolvency of the debtor resulting from such negligence.

4i5o vs# Court of !ppeals(2$ 0C6& '$) %ssue: ,f the contract of guaranty states that the same is to secure advances to be made 9from time to time:, is this a valid guaranty? +eld:@es, this will be construed as a continuing guarantyHsurety given to secure future debts and is not limited to a single transaction but which contemplates a future course of dealing, covering a series of transactions generally for an indefinite period of time or until revo"ed.

Effects of G)arant, as Bet*een Co%$)arantors S!RET0 +he obligation of several guarantors of the same debtor and for the same debt is )oint and each is bound only to pay his proportionate share. +herefore, one who has paid the entire debt may see" reimbursement from each of his co*guarantors the share which is proportionately owing him. ,fany of guarantors should be insolvent, his share shall be borne by the others ,including his payer(walang habol ang nagbayad) in same proportion he may set up defense against the one who paid the same defenses which would have pertained to the principal debtor against the creditor and which are not purely personal to the debtor a sub*guarantor in case of insolvency of guarantor who he is bound himself is responsible to co*guarantors in same terms as the guarantor @ou assume liability as a principal whether may property or wala ang debtor Recent ()ris'r)dence on S)ret,s"i' %nciong$ 2r# vs# Court of !ppeals(2BG 0C6& BGF) %ssue: ;etitioner argues that the dismissal of the complaint against -aybe, the principal debtor, and against ;antanosas, his co*member, constituted a release of his obligation especially because the dismissal of the case against ;antanosas was upon the motion of private respondent itself, citing &rticle 20F0 as basis for his argument. +eld! 0ection (, Chapter %, +itle $, 5oo" ,K of the Civil Code states the law on )oint and several obligations. <nder &rticle $2'G thereof, when there are two or more debtors in one and the same obligation, the presumption is that the obligation is )oint so that each of the debtors is liable only for a proportionate part of the debt. +here is a solidary liability only when the obligation e2pressly so states, when the law so provides or when the nature of the obligation so re3uires. ;etitioner signed the promissory note as a solidary co*ma"er and not as a guarantor therefore &rticle 20F0 is not applicable. 5ecause the promissory note involved in this case e2pressly states that the three signatories therein are )ointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation. +he choice is left to the solidary creditor to determine against whom he will enforce collection. Conse3uently, the dismissal of the case against >udge ;antanosas may not be deemed as having discharged petitioner from liability as well. &s regards -aybe, suffice it to say that the court never ac3uired )urisdiction over him. ;etitioner, therefore, may only have recourse against his co*ma"ers, as provided by law. "hilippine /ational -an1 vs# Court of !ppeals($'F 0C6& G G) & surety7s liability to the creditor or promisee of the principal is said to be direct, primary and absolute. ,n other words, he is directly, primarily and e3ually bound with the principal as original promissor although he possesses no direct or personal interest over the latter7s obligations nor does he receive any benefits therefrom. "hilippine /ational -an1 vs# "ineda($'G 0C6& $) ,f the principal debtor and the surety are held liable, their liability to pay the creditor would be solidary but the nature of the surety7s underta"ing is such that it does not incur liability unless and until the principal debtor is held liable. *inman General !ssurance Corp# vs# )ali1($FF 0C6& G(0) ,n the absence of collusion, the surety is bound by a )udgment against the principal even though he was not a party to the proceedings. +he nature of its underta"ing ma"es it privy to all proceedings against its principal. Le$al and ()dicial Bonds & )udicial bondsman and the sub*surety are not entitled to the benefit of e2cussion because they are not mere guarantors, but sureties whose liability is primary and solidary.

E&tin$)is"ment of G)arant, $.-eing accessory and subsidiary$ guaranty is terminated &hen the principal obligation is extinguished by: a) b) c) d) e) f) payment or performance# loss of the thing due condonation or remission of the debt confussion or merger of the rights of the creditor and debtor compensation novation

Luaranty may also be e2tinguished if the creditor has released the guarantor although the principal obligation remains (&rticle 20GF) or in case of material alteration which imposes a new obligation or added burden on the party promising or which ta"es away some obligation already imposed, changing the legal effect of the original contract and not merely the form thereof. (/!)C( vs# Torrento, 20 0C6& (2G M$' GN). 2.6elease of one guarantor by the creditor without the consent of the other guarantors benefits all to the e2tent of the share of the guarantor released (&rticle 20GF). %.&n e2tension of the term granted by the creditor to the debtor without guarantor7s consent e2tinguishes the guaranty (&rticle 202'). (.+he guarantor who pays is entitled to be subrogated to all the rights of the creditor (&rticle 20 G). ,f there can be no subrogation because of the fault of the creditor, as when the creditor releases or fails to register a mortgage, the guarantors are thereby released. +he same rules applies even though the guarantors be solidarily (&rticle 20F0).

PLEDGE ,t is 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 shall be returned with all its fruits and accessions. Essential Re2)isites3 /456 $.constituted to secure the fulfillment of a principal obligation 2.pledgor is the absolute owner of the thing %.persons constituting the pledge have the free disposal of their property or are legally authori4ed to do so (.the property must be placed in the possession of the creditor (20'%) B.the description of the thing and the date of the pledge must be in a public instrument to bind %rd persons (20' )

PLEDGEE O#li$ations

+o appropriate fruits, income, dividends or interest of thing with those which are owing him, and if none, to apply it to the principal (2$02) +a"e care of the thing with the diligence of a good father of a family, sub)ect to reimbursement (20'') Cannot deposit the thing with a %rd person and is bound by his agents7 acts (2$00) .iable for loss and deterioration (20'')

Ri$"ts PARTIES ;./1LA6 the debtor or a third person who pledges the sub)ect matter to secure the loan of the debtor# he must be the owner and must have free disposal of the property or at least must be authori4ed to dispose ;./1L// * creditor 200 -A+/! +he pledgor may or may not be the debtor (20F%, 2 nd paragraph) 200 note!& pledge e2ecuted before a person becomes the owner is KA,1 (vda de bautista v. marcos, % 0C6& (%()

+o use the thing to preserve it (20'')

+o retain possession of the thing until fulfillment of the obligation (20'F) 6eimbursement for e2penses to preserve the thing (20'')

=ay file actions to recover it from or defend it against %rd persons (2$0%) ,n case of fear of destruction or impairment without the fault of the pledgee, may cause the sale in a public auction (2$0F)

,f he is deceived as to substance or 3uality of the thing may as" for replacement A6 demand immediate payment (2$0')

7"at 'ro'erties to #e 'led$e-

PLEDGOR Ri$"ts and O#li$ations

20'( * all movables which are within the commerce of man provided they are susceptible of possession 20'B * incorporeal rights, evidenced by negotiable instruments, bills of lading, shares of stoc"s, bonds, warehouse receipts and similar documents. +he instrument must be delivered to the pledgee and properly indorsed.

=ay dispose of the thing, with the consent of the pledgee and with the thing still sub)ect to the pledge and in the possession of the pledgee (20'G)

=ust advise the pledgee of hidden flaws of the thing otherwise shall be liable for damages (2$0$)

Puture property cannot be pledged (Gen# %nsurance v# Masa1ayan$ 67 )CR! 89:; & mortgagee has the right to rely upon the title and does not have to in3uire further, unless mortgagee is a ban"ing institution ( G)%) v# C!$ 9<= )CR! 9:7)

,n case of unauthori4ed use or misuse by pledgee, may as" )udicial or e2tra)udicial deposit of thing (2$0() 200 notes!na"ita mo na ginagamit ng ana" ng creditor ang gamit na gi* pledge mo. In case of loss or im'airment

& co*owner may pledge his portion of the thing ( "/- v# C!$ >< )CR! 9:=;

'erson

If t"e 'led$ee is ne$li$ent % ma, as8 for de'osit *it" 9rd

If *it"o)t fa)lt of 'led$ee % ma, demand ret)rn of t"in$ and offer a re'lacement +inferior to ri$"t to sell #, 'led$ee) +/.4:) this is what is termed as the right of pledge to sell is superior to right of pledgor to replace, so "ung ayaw ng pledgee eh di mo pwede ireplace.

E&tin$)is"ment of Pled$e

(2$$0)

,f the thing pledged is returned by pledgee to the pledgor

& statement in writing by the pledgee that he renounces or abandons his pledge (2$$$) Pact)m Commissori)m +1oid) +he stipulation for an automatic appropriation by the creditor of the property in the event of non*payment of the obligation is void +here should be a pledge, mortgage, or antichresis of property by way of security for the payment of the principal obligation# Pro1isions A''lica#le onl, to Pled$e +S! AR0)

/2ception(whereby pactum commissorium is valid)! 2$$2* after 2 auction sales and there are no bidders, pledgee may appropriate the thing to himself and give an ac3uittance of the entire claim

$.+he pledgor retains his ownership of the thing pledged. 8e may, therefore, sell the same provided the pledgee consents to the sale. &s soon as the pledgee gives his consent, the ownership of the thing pledged is transferred to the vendee sub)ect to the rights of the pledgee, namely, that the thing sold may be alienated to satisfy the obligation (&rticle 2$$2) and that the pledgee must continue in possession during the e2istence of the pledge. (&rticle 20'%, 20'F). 2.+he possession of the pledgee constitutes his security. 8ence, the debtor cannot demand for its return until the debt secured by it is paid. (0ee &rticle 2$0B? )errano vs# Court of !ppeals$ $' 0C6& $0G M$''$N) -ut the right of retention is limited only to the fulfillment of the principal obligation for which the pledge was created. (&rticle 20'F). %.;ledgee has the obligation to ta"e care of the thing pledged with the diligence of a good father of the family. 8e is entitled to reimbursement of the e2penses incurred for its preservation and he is liable for loss or deterioration by reason of fraud, negligence, delay or violation of the terms of the contract. (&rticles $$G(, $$G0). (.;ledgee is not authori4ed to transfer possession of the thing pledged to a third person. Exception:stipulation authori4ing pledgee to transfer possession. (&rticle 2$00) B.+he pledgee has no right to use the thing pledged or to appropriate the fruits thereof without the authority of the owner (&rticle 2$0(# see &rticle $'GG). -ut the pledgee can apply the fruits, income, dividends, or interest, if owing and thereafter to the principal of his credit. (see &rticle 2$%2). Exception: contrary stipulation .The pledgor may as1 that the thing pledged be deposited @udicially or extra@udicially# *if the creditor uses the thing without authority# *if he misuses the thing in any other way (&rticle 2$0()# *if the thing is in danger of being lost or impaired because of the negligence or willful act of the pledge. G. ;ledgor cannot as" for the return of the thing pledged until said obligation is fully paid including interest due thereon and e2penses incurred for its preservation (&rticle 20''). Exception:;ledgor is allowed to substitute the thing pledged which is in danger of destruction or impairment with another thing of the same "ind and 3uality (&rticle 2$0G). F.+he possession of the thing pledged by the debtor or owner subse3uent to the perfection of the pledge gives rise to a prima facie presumption that the thing has been returned and, therefore, that the pledge has been e2tinguished. '.When the thing pledged is later found in the hands of the pledgor or the owner, only the accessory obligation of pledge is presumed remitted, not the principal obligation itself (&rticle $2G(). $0.+he sale of the thing pledged e2tinguishes the principal obligation whether the price of the sale is more or less than the amount due. -%f the price of the sale is more than the amount due the creditor , the debtor is not entitled to the e2cess unless the contrary is provided#

P)#lic A)ction

Pled$or * may bid and if he offers the same terms as highest bidder, he is preferred (2$$%) Pled$ee * may bid but not if he is the only bidder (2$$%, 2
nd

par.)

all bids shall offer to pay the purchase price at once (2$$()

/44; notes-In case of deficienc,3 t"e 'led$ee cannot collect t"e #alance +/..6) and in case of e&cess3 t"e de#tor is not entitled to t"e e&cess )nless t"e contrar, is 'ro1ided +/..6)

*,n the same way, if the price of the sale is less , neither is the creditor entitled to recover the deficiency. & contrary stipulation is void (&rticle 2$$B).

&n oath in a contract of C= wherein the parties severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purposes and that the same is a )ust and valid obligation and not one entered into for the purpose of fraud (0ection B, Chattel =ortgage .aw) 200 notes! &bsence only vitiates the mortgage as to % rd persons without notice li"e creditors and subse3uent encumbrancers ( "RC v# 2arAue$ B8 "hil 99>;

Period to foreclose t"e C C<ATTEL ORTGAGE

2$(0 by a chattel mortgage, personal property is recorded in the Chattel =ortgage 6egister as a security for the performance of an obligation. 200 notes!,f the movable, instead of being recorded is delivered to the creditor or a third person, the contract is a pledge, not a chattel mortgage. %% as such it is very important to register it to the Chattel =ortgage 6egister.

&fter %0 days from the time the condition is bro"en +he %0*day period is the minimum period with at least $0 days7 notice to the mortgagor and posting of public notice of time, place and purpose of the sale (Cabral v# Evangelista$ 9< )CR! 8:::; E&tra=)dicial >oreclos)re Proceeds of t"e Sale

Essential Re2)isites

Costs and e2penses of "eeping and sale demand or obligation secured by the C= subse3uent mortgagees mortgagor

constituted to secure the fulfillment of a principal obligation pledgor is the absolute owner of the thing Ri$"t of Redem'tion A1aila#le in e&tra=)dicial foreclos)re

persons constituting the pledge have the free disposal of their property or are legally authori4ed to do so personal property must be recorded in the chattel mortgage registry (2$(0)

Done #, 'a,in$ t"e mort$a$ee t"e amo)nt d)e on s)c" mort$a$e and t"e costs and e&'enses inc)rred #, s)c" #reac" of condition #efore t"e sale t"ereof OR

If after t"e sale3 done #, 'a,in$ t"e *innin$ #idder t"e ')rc"ase 'rice and all costs *it"in one ,ear from date of re$istration of certificate of sale Effect of Re$istration

6egistration is binding notice to other creditors of its e2istence and creates a real right or a lien which follows the chattel whenever it goes

7"o Can Redeem

+he lien of a chattel mortgagee over the property is superior to the levy made by an assignee of the unsecured )udgment creditor of the chattel mortgagor (/orthern v# CoAuia$ B< )CR! C=7)

=ortgagor ;erson holding subse3uent mortgage 0ubse3uent attaching creditor

Ill)stration S)#=ect atter &lways personal or movable property

Creditor & is the first mortgagee he can foreclose the chattel mortgage in case of default Creditor 5 is the 2 nd mortgagee he can redeem the property by paying & the mortgage debt. 8e can now appropriate the property to himself

Covers only property described in the C= and not li"e or substituted property thereafter ac3uired by the mortgagor and placed in the same depositary as the property originally mortgaged (0ec. G, par ( &ct $B0F) (do not cover after ac3uired property)

1escription of the property must be such to enable parties to identify the same after a reasonable investigation and in3uiry (Saldana v !hil Guarant"# $%& !hil '$')

Creditor C is the attaching creditor he can redeem the property by paying & the mortgage debt but he only ac3uires the right to foreclose and not the right to own the property

1ebtor can also redeem the property by paying the mortgage debt and get the property bac"

Affida1it of Good >ait"

Ri$"t to Deficienc,

=ortgagee can recover deficiency for $0 years

/2ception! when the chattel mortgage was instituted to secure the purchase of a property on installment(6ecto .aw)

Co1era$e- Dra$net Cla)se +@alid) & clause which subsumes all debts of past or future origin. Criminal Offenses In1ol1in$ C"attel ort$a$e +he mortgage may secure future loans or advancements. /.g. for the payment of loan of ;20,000 and such other loans or advances already obtained or still to be obtained ( Duintanilla v# C!$ 9=> )CR! C>= E8>>=F;

&rticle %$' of the 6;C "nowingly removing any personal property mortgage under the Chattel =ortgage .aw to any province or city other than the one where it was located at the time of e2ecution of mortgage without the W6,++/consent of the mortgagee

selling or pledging personal property already mortgaged without the consent of the mortgagee written at the bac" of the mortgage and duly recorded with the Chattel =ortgage 6egistry REAL ORTGAGE ort$a$e m)st #e in a ')#lic doc)ment. & 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 which obligation shall be satisfied with the proceeds of the sale of said property or rights in case said obligation is not complied with at the time stipulated. <nli"e in pledge, real mortgage includes fruits <nli"e in chattel,it includes after ac3uired properties (also in anthichresis) -o valid mortgage is constituted where the deed of mortgage is in a mere private document (+echanova v# !dil$ 877 )CR! 76:) ,n &ntichresis, the amount of principal and interest must be in writing ,n ;ledge, there must be delivery ,n Chattel, there must be registration ,n 6eal, it must be in public document (it is public since it is notari4ed) Effect of Non% Re$istration 1. Deed in a Pri1ate Doc)ment $.mortgage is in a public document but not recorded * mortgage is nonetheless binding on the parties (2$2B) 2.,f the mortgage is in a private document, the mortgage is void and the mortgagee may demand reduction of mortgage in a public instrument (notari4ed) 200 notes! 6egistration only operates as a notice of the mortgage to others but does -A+ add to the validity of the mortgage or convert an invalid mortgage into a valid one ()amanilla v# Ca@ucom$ 8:= "hil 7C9; 200 notes!6egistration is merely ministerial and is not a declaration by the state that such an instrument is valid and subsisting ( !griculture v# Gusay$ 8:= "hil =>8;

Essential Re2)isites$.Constituted to secure the fulfillment of a principal obligation 2.+he mortgagor is the absolute owner of the thing mortgaged or that the persons constituting the mortgage have the free disposal of the property or are legally authori4ed to do so

S)#=ect

atter !nre$istered Sale 1. Recorded ort$a$e ,f prior to the mortgage, the 0= was sold to another person, the sale prevails (even if it is unregistered) over the registered mortgage. +he original owner has parted with ownership and at the time of mortgage he no longer had ownership and free disposal of the thing ( )tate %nvestment v# C!$ 967 )CR! CB< E8>>BF; 2$2F the mortgage credit may be alienated or assigned to a % rd person in whole or in part 200 notes! a stipulation forbidding the owner from alienating the 0= shall be KA,1

2$2( only the following property may be the ob)ect of a contract of pledge! *,mmovables *&lienable real rights in accordance with the laws imposed upon immovables 200 notes!/2tends to natural accessions, improvements, growing fruits, rents or income not yet received when the obligation becomes due 200 notes! +he amount or indemnity owing to the owner from insurers of the 0= or those from arising from e2propriation for public use W8/+8/6 +8/ 0= ,0 ,- +8/ 8&-10 AP +8/ AW-/6 A6 & % 61 ;/60A(5.</ 'B! ,t may include A>TER%AC?!IRED PROPERTIES this is allowed when the real property are perishable or sub)ect to inevitable wear and tear. +he purpose here is to maintain the original value of the securities given (Mendo.a v# C!$ 2une 96$ 9::8;

Kinds of Real

ort$a$e

Koluntary one which is agreed to between the parties or constituted by will of the owner of the property /3uitable one which, although it lac"s the formalities of a mortgage shows the intention of the parties to ma"e the property as security for the debt

Re2)isites$.parties entered into a contract of sale 2.parties intention is to secure an e2isting debts by way of mortgage. ort$a$e is 'res)med E2)ita#le *"en$.price of sale with right to repurchase is unusually inade3uate (e2! debt is ; B000 but security is worth ;2FB000) 2.vendor remains in possession as lessee %.e2tension of period of redemption after e2piration of right to repurchase. (.purchaser retains parts of the purchase price B.vendor binds himself to pay ta2es on the thing sold .other cases where the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligations

7<EN T<E PRINCIPAL OBLIGATION IS NOT >!L>ILLED

=ortgagee may choose between filing a collection case or foreclosing the mortgage Poreclosure may either be e2tra)udicial A6 )udicial

.egal one re3uired by law to be e2ecuted in favor of certain persons /.g. a person bound to give a bond but can7t e2ecute a bond may e2ecute a real mortgage over his property covering his obligation E>>ECTS O> ORTGAGE REDE PTION Creates a real ri$"t% until discharged, it follows the property wherever it goes and subsists notwithstanding change of ownership. ,f the mortgagor sells the property , the 0= remains sub)ect to the fulfillment of the obligation secured by it (-onnevie v# C!$ 896 )CR! 899) 5&6! 1ebtor borrow ;$ =illion from creditor mortgaging his car. &fter the mortgage, 1ebtor sold the car to buyer. 0ale is with creditor7s consent. Creditor forecloses mortgage and there was a bidding, then there was the winning bidder.Who has a preferential right? +he #),er who buys the property from debtorHowner after the mortgage A6 the *innin$ #idder during foreclosure? 8/.1! +he winning bidder has a preferential right but sub)ect to the new owner7s (buyer) e3uitable right of redemption ()antiago v# 4ionisio$ >9 "hil 7<6) 200 notes! +he sale of car to the buyer does not transfer ownership but it creates merely an encumbrance it does involve the transfer, cession or conveyance of property but only constitutes a lien. What is lost is the free disposal and sale of the 0= (Medida v# C!$ 9:< )CR! <<=) 200 notes!if mortgage was not registered, and if napalipat ng buyer sa pangalan niya then he already has preferential right but if "ung di niya napalipat at na foreclose, then highest bidder has preferential right and buyer merely has e3uitable right of redemption only. ..E?!IT0 O> REDE PTION 6ight of the mortgagor to redeem the property after his default in the performance of the conditions of the mortgage 5<+ before the confirmation of the auction sale of the mortgaged property 7"en a1aila#le General R)le! Anly in )udicial foreclosure '0*$20 days from receipt of )udgment in favor of the creditor A6 before the confirmation of the sale at the discretion of the court /2ception! in e2tra)udicial foreclosure where the mortgagor is a )uridical entity * until but not after the registration of certificate of foreclosure sale which shall not be more than % months after foreclosure, W8,C8/K/6 ,0 /&6.,/6 (6& FG'$) 200 notes!as such, if na*register agad, no need for % months "ay whichever is earlier "asi ang sabi ng law, so la na habol ang corporation "ay na register naman.

Effects of an in1alid mort$a$e

+he principal obligation subsists What is lost is merely the right to foreclose /.RIG<T O> REDE PTION +he right of the mortgagor to redeem the mortgaged property within a certain period after it was sold for the satisfaction of the debt 7"en a1aila#le L/-/6&. 6<./! e2tra)udicial foreclosure within one year from registration of certificate of sale

+he mortgage deed remains as evidence of personal obligation of the debtor (4-" v# C!$ 97> )CR! CC8)

/DC/;+,A-! in )udicial foreclosure where the mortgagee is ;-5 or a ban"ing institution within one year from registration of the foreclosure sale (it is because ban" e2tends it to another year in order for such person to be able to redeem their property)

EATRA(!DICIAL >ORECLOS!RE Redem'tion A1aila#le in E&tra=)dicial >oreclos)re 200 notes!since li"e in chattel mortgage, in e2tra)udicial foreclosure ,the winning bidder is not the owner automatically since the ob)ect is sub)ect to redemption $.,f mortgagor is -A+ a )uridical entity * 6ight of 6edemption Within $ year from date of registration of certificate of sale 2.,f mortgagor is a )uridical entity * /3uity of 6edemption until but not after the registration of certificate of foreclosure sale which shall not be more than % months after foreclosure, W8,C8/K/6 ,0 /&6.,/6 (6& FG'$)

(!DICIAL >ORECLOS!RE Process$.Pile an action with 6+C which has )urisdiction overlocation of 0ub)ect =atter 2.,f court finds complaint well*founded, shall order ;ayment of debt within '0*$20 days from entry of )udgment (receipt of )udgment by debtor, 8errera v. &rellano, 'G ;hil GG ) (here, e3uity of redemption sets in) %.,f no payment, the court orders sale of 0= to the 8ighest bidder in a public auction (however, highest bidder is not the automatic owner since there is still confirmation sale) (.+he court calls parties for confirmation of sale (here, e3uity of redemption still sets in since as long as di pa naconfirm ang sale, pwede pa i*redeem "ahit lampas na ng $20 days)

<o* to 1alidl, redeem $.=ust be made within $ year from date of registration of the certificate of sale or within the % month period or before confirmation in case of )uridical mortgagors 2.;ayment of ')rc"ase 'rice plus $J interest per month with ta2es thereon from date of registration of sale until date of redemption. =ust be made either to the purchaser or officer who made the sale ( Reyes v# 4elos )antos$ 6: )CR! 7C8) %.Written notice of redemption must be served on officer who made the sale and a duplicate with 6egister of 1eeds ( Rosales v# Gboa$ 89: )CR! <B>; Redem'tion A1aila#le in ()dicial >oreclos)re ..E2)it, of redem'tion '0*$20 days from entry of )udgment or at any time before the sale is confirmed upon the discretion of the court (Sala(ar v )e *orres# $%+ !hil ,%') /.Ri$"t of Redem'tion $ year from registration of order confirming the sale if the mortgagee is ;-5 or a ban"ing institution 7"o can RedeemB B./2ecution of )udgment .&pplication of ;roceeds

=ortgagor or one who is in privity of title with mortgagor

0uccessor*in*interest *Ane to whom debtor has transferred his right

*Ane to whom debtor has conveyed his interest in the 0= *Ane who succeeds to the interest of the debtor *Ane or more )oint debtors who were )oint owners *Wife as regards her husband7s homestead *Compulsory heir

2.&nother obligation of the creditor is to apply the fruits, after receiving them to the interest, if owing, and thereafter to the principal (&rticle 2$%2) in accordance with the provisions of &rticle 2$%% or 2$%F. 8ence, the duty of the creditor to render an account of said fruits to the debtor and the corresponding right of the latter that the said fruits be applied to the debt. (-arretto vs# -arretto$ %G ;hil. 2%( M$'$GF? 4ia. and Rubillos vs# 4e Mende.ona$ (F ;hil. M$'2 N# Macapilac vs# Gutierre. Recipe (% ;hil. GG0 M$'22N).

In case of Deficienc,

accrues

Can recover within $0 years from time the right of action =ay recover even during period of redemption ,ncorporated in deficiency )udgment in a )udicial foreclosure

Remed, of Creditor in Case of Defa)lt $.+o bring an action for specific performance 2.+o petition for the sale of the real property as in a foreclosure of mortgages under 6ule F of the 6ules of Court. +he parties, however, may agree on an e2tra)udicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge (see &rticle $%0G# Tavera vs# El +ogar *ilipino$ %nc. F ;hil. G$2).

ANTIC<RESIS Contract whereby the creditor ac3uires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing and thereafter to the principal of his credit. C"aracteristics $.,t is an accessory contract because it secures the performance of a principal obligation. 2.,t is a formal contract because the amount of the principal and of the interest must both be in writing, otherwise the contract of antichresis is void. Note: $.1elivery of the property to the creditor is re3uired only in order that the creditor may receive the fruits and not for the validity of the contract. 2.,t is not essential that the loan should earn interest in order that it can be guaranteed with a contract of antichresis. &ntichresis is susceptible of guaranteeing all "inds of obligations, pure or conditional. ( 2avier vs# alliser, (C&) -. 2 (F*6, &pril 2', $'B0# )ta# Rosa vs# /oble, %B A.L. 2G2($). %.+he fruits of the immovable which is the ob)ect of the antichresis must be appraised at their actual mar"et value at the time of the application. (see &rticle 2$%F) (.+he property delivered stands as a security for the payment of the obligation of the debtor in antichresis. 8ence, the debtor cannot demand its return until the debt is totally paid. B.& stipulation authori4ing the antichretic creditor to appropriate the property upon the non*payment of the debt within the period agreed upon is void. (see &rticle 20%F). O#li$ations of Antic"retic Creditor $.+he creditor is obliged, unless there is a stipulation to the contrary, to pay the ta2es and charges upon the estate. ,f he does not pay the ta2es, he is, by law (&rticle $$G0), re3uired to pay indemnity for damages to the debtor. ("ando vs# Gimene., B( ;hil. (B' M$'%0N).

(!DICIAL DEPOSIT 200B ta"es place when an attachment or sei4ure of property in litigation is ordered 200 movable or immovable may be the 0= of se3uestration ;rimary purpose! to maintain status 3uo during the pendency of litigation or to insure the rights of parties to property.

DEPOSIT & deposit is constituted from the moment a person receives a thing belonging to another, with the obligation of safely "eeping it and returning the same. ,f the safe"eeping of the thing is not the principal purpose of the contract, there is -A deposit but some other contract. +he contract may either be lease(if hiniram pero may bayad), commodatum (hiniram at ginamit for specific purpose) or agency ("inuha at binenta on your behalf). Role of Deli1er, &n agreement to constitute a deposit is binding but the deposit is -A+ perfected until the delivery of the thing

200F depositary must comply with the obligations of a good father of family 200G* obligation of depositary subsists until the end of controversy which gave rise to the se3uestration, unless the court orders. EATRA(!DICIAL%DEPOSIT NECESSAR0 DEPOSIT & deposit is necessary when! ,t is made in compliance with a legal obligation ($'' ) ,t ta"es place on the occasion of any calamity, such as fire, storm, flood, pillage, shipwrec" or other similar events ($'' ) +ravellers in hotels or inns deposit effects ($''F) To com'l, *it" a le$al o#li$ation

>udicial deposit of 0= the 'ossession of which is disputed by two or more persons under &rt. B%F ,f the two possessors are identical as to dates of possession and both can present title +hing must be placed in )udicial deposit

S)#=ect atter Leneral 6ule * Anly movable things may be the ob)ect of a deposit ($' ) &n /2ception is in terms of )udicial deposit may cover immovable or movable (200B*2'' ) Nat)re of a De'osit /ssentially gratuitous e2cept when there is an agreement to the contrary A6 unless the depositary is engaged in the business of storing goods >orm & contract of deposit may be entered into orally or in writing

1eposit of 0= of pledge when there is unauthori4ed use by the pledgee When constituted to guarantee contracts with the government arising from an obligation which is administrative in character.

Necessar, De'osit C On t"e occasion of a calamit, When during a fire, flood, storm, or other calamity a property is saved from destruction by another person without the "nowledge of the owner, the latter is bound to pay the former )ust compensation ;ossession passes by accident from one person to another and the law imposes on the recipient the obligations of a bailee

;rimary purpose! to save the property

/44; notes- De'osit can eit"er #e =)dicial or e&tra=)dicial and *it" re$ard t"e latter it can eit"er #e 1ol)ntar, or necessar,.

Necessar, De'osit C <otels

+he "eepers of hotels on inns shall be responsible as depositaries for effects deposited by guests provided! -otice was given to them about the effects Luests have ta"en precautions prescribed regarding their safe"eeping

ta"e steps so that value of securities is preserved ($'GB)

.iable for vehicles, animals and articles placed in the anne2es of the hotel ($''')

,f 0= delivered closed and sealed! must return it in the same condition liable for damages should the seal be bro"en through his fault. fault on the part of the depositary is presumed unless there is proof to the contrary

force

.iable for loss or in)ury through! &cts of servants or employees of the "eeper &cts of strangers &cts of robbers <-&++/-1/1 by use of arms or irresistible O#li$ations of t"e De'ositar,- Loss #, >ort)ito)s E1ent +.D:D) 200 notes!fortuitous event are those which are foreseen li"e fire (e2cept if that is cause by lightning)

NOT liable for loss or in)ury through! Porce ma)eure &cts of robbers with arms or using irresistible force &cts of guests, his family, servants or visitors Character of the 0=

200% hotel*"eeper cannot free himself from responsibility by posting notices to the effect that he is not liable for articles brought in by guests Koid stipulations stipulations which diminish or suppress liability of "eepers 200( may validly retain articles as security for credits of guests <o* o#li$ations are satisfied +he debtor is liable with all his property, present and future, for the fulfillment of his obligations. /2ception! When properties are e2empted. @OL!NTAR0 DEPOSIT Ane wherein the delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited 200 notes! +he main distinction with necessary deposit is that the depositor has complete freedom in choosing the depositary.

L/-/6&. 6<./! -ot liable /DC/;+,A-0! 0tipulated <ses without owner7s permission 1elays in return &llows others to use it even though he himself is authori4ed

O#li$ations of t"e De'ositar,- Loss #, >orce

a=e)re +.DD4)

200 notes!force ma)eure are those which are unforeseen (li"e earth3ua"e)

.oss by force ma)eure or government order and receives a thing or money in lieu of the thing, he must deliver to the depositary the thing or money he received ($''0) Ri$"ts of t"e De'ositar, $.8e cannot demand that depositor proves his ownership 5<+ ,n case he discovers that the 0= was stolen and who the true owner is, must inform the true owner of the deposit ,f owner does not claim within $ month from notice, depositor may return 0= to depositary without incurring liability 2.=ay retain the 0= in pledge until full payment of what may be due him by reason of deposit ($''()

O#li$ations of t"e De'ositar,

+o "eep the thing safely and to return it, when re3uired, to the depositor or to his heirs or successors or to the person who may have been designated in the contract ($'G2) 1egree of care re3uired degree of care one would e2ercise over his own property =ust return the 0= together with all accessions, accessories and products. Cannot deposit the 0= with a %rd person . ,f deposit with %rd person is allowed, depositary is liable for loss if deposited with %rd person who is manifestly careless or unfit.

!se of t"e S)#=ect atter 1epositary cannot ma"e use of the thing deposited without the e2press permission of the depositor, unless use is necessary for preservation. Atherwise, he shall be liable for damages.

=ay change the way of the deposit if! under the circumstances he may reasonably presume that the depositor would consent to the change if he "new the facts of the situation. 5efore change he must notify the depositor and wait for his decision, unless delay would cause danger.

,f allowed to use the contract is no longer a deposit but becomes a commodatum, e2cept where safe"eeping is still the principal purpose. +he permission shall not be presumed.

R)le in case of inca'acit,

1epositary holding certificates, bonds, instruments which earn interest! must collect interest when they become due

securities

or

Af the depositor depositary shall be sub)ect to all obligations of a depositary and may be compelled to return the thing 5@ the guardian or administrator of the incapacitated person ($'G0)

Af the depositary depositor shall only have an action to recover the 0= while in possession of the depositary or to compel payment of amount that depositary was enriched.($'G$) ,f property is in the hands of a %rd person who ac3uired 0= in good faith, depositor may sue the %rd person

2.,f there are two or more credits with respect to the same specific movable property, they shall be satisfied pro*rata, after the payment of duties, ta2es, and fees due the 0tate or any subdivision thereof (&rticle 22(G). %.+hose credits which en)oy preference in relation to specific real property or real rights, e2clude all others to the e2tent of the value of the immovable or real right to which the preference refers (&rticle F). (.,f there are two 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 ta2es and assessments upon the immovable property or real right (&rticle 22('). B.+he e2cess, 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 the other credits (&rticle 22B0). .+hose 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 rules! *,n the order established in &rticle 22((# *Common credits referred to in &rticle 22(B shall en)oy no preference and shall be paid pro rata regardless of dated (&rticle 22B$).

Are t"ese contracts of de'ositB 5an" deposits -A. they parta"e the nature of a loan

0afety deposit bo2es 0pecial "ind of contract of deposit but more of a bailor*baillee relationship is established between the parties. ,n case of loss of thing deposited, the ban" is liable.

O#li$ations of t"e De'ositor

=ust reimburse depositary for e2penses he may have incurred for the preservation of the thing if gratuitous deposit ($''2) =ust reimburse depositary for any loss arising from the character of the 0=, unless the depositor was not aware of or was not e2pected to "now the dangerous character of the 0= or unless he notified the depositary of the same or depositary was aware of it ($''%) E&tin$)is"ment of @ol)ntar, De'osit

Lia#ilit, for O#li$ations

1eath of depositary e2tinguishes the deposit in gratuitous deposit but not in deposit for compensation $''B <pon loss or destruction of the thing deposited ,n case of gratuitous deposit, upon the death of either the depositor or the depositary Ather causes (novation, merger, e2piration of the term, fulfillment of resolutory condition)

+he debtor is liable with all his property, present and future, for the fulfillment of his obligations, sub)ect to the e2emptions provided by law.

CONC!RRENCE AND PRE>ERENCE O> CREDITS 200 notes! applicable only when assets is not enough to pay liability refers to credits which are already due. Conc)rrence of creditsSimplies the possession by two or more creditors of e3ual rights or privileges over the same property or all of the property of the debtor. Preference of Credit-is the right held by a creditor to be preferred in payment of his claim above others (i.e., to be paid first) out of the debtor7s assets. ;reference is an e2ception to the general rule ;reference does not create an interest in property. ,t creates simply a right of one creditor to be paid first the proceed of the sale of property as against another creditor. ,t creates no lien on the property, and therefore, gives no interest in the property to the preferred creditor but a preference in application of the proceeds after the sale. +he rules on preference of credits apply only where two or more creditors have separate and distinct claims against the same debtor who has an insufficient property. Order of Preference of Credits $.+hose credits which en)oy preference with respect to specific movable, e2cluded all others to the e2tent of the value of the personal property to which the preference refers (&rticle 22( ). E&em't Pro'ert, 200 notes!even though e2empted but if there e2ist an encumbrance li"e a mortgage, then such property shall be sub)ect to e2ecution. $.*amily home constituted )ointly by husband and wife or by unmarried head of a family (&rticle $B2, Pamily Code). Exceptions: a.)for non*payment of ta2es# b.)for debts incurred prior to the constitution of the family home# c.)for debts secured by mortgages on the premises before or after such constitution# and d.)for debts due to laborers, mechanics, architects, builders, material men and others who have rendered service or furnished material for the construction of the building 2.6ight to receive support as well as any money or property obtained as such support. (&rticle 20B, Pamily Code) %.+ools and implements necessarily used by him in his trade or employment# (.+wo horses, or two cows, or two carabaos or other beasts of burden, such as the debtor may select, not e2ceeding one thousand pesos in value and necessarily used by him in his ordinary occupation# B.8is necessary clothing and that of all his family.

.8ousehold furniture and utensils necessary for house"eeping and used for that purpose by the debtor, such as the debtor may select, of a value not e2ceeding one thousand pesos# G;rovisions for individual or family use insufficient for three months# F.+he professional libraries of attorney7s, )udges, physicians, pharmacists, dentist, engineers, surveyors, clergymen, teachers and other professionals, not e2ceeding three thousand pesos in value# '.Ane fishing boat and net, not e2ceeding the total value of one thousand pesos, the property of any fisherman, by the lawful use of which he earns a livelihood# $0.0o much of the earnings of the debtor for his personal services within the month preceding the levy as are necessary for the support of his family# $$..ettered gravestones# $2.&ll moneys, benefits, privileges or annuities accruing or in any manner growing out of any life insurance, if the annual premiums paid do not e2ceed five hundred pesos, and if they e2ceed the sum, a li"e e2emption shall e2ist which shall bear the same proportion to the moneys, benefits privileges and annuities so accruing or growing out of such insurance that said five hundred pesos bears to the whole premiums paid# $%.+he right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the government# $(.Copyrights and other properties especially e2empted by law (0ection $2, 6ule %') $B.;roperty under legal custody and of the public dominion.

(.Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or those guaranteed by a chattel mortgage upon the things mortgaged, up to the value thereof# B.Credits for ma"ing repairs, safe"eeping or preservation or personal property on the movable thus made, repaired, "ept or possessed# .Claims for laborers wages, on the goods manufactured or the wor" done# G.Por e2penses of salvage, upon the goods salvaged# F.Credits between the landlord and the tenant arising from the contract of tenancy on shares, on the share of each in the fruits or harvest# '.Credits for transportation, upon the goods carried, for the price of the contract and incidental e2penses, until their delivery and for thirty days thereafter# $0.Credits for lodging and supplies usually furnished to travelers by hotel"eepers, on the movables belonging to the guest as long as such movables are in the hotel, but not for money loaned to the guests# $$.Credits for seeds and e2penses for cultivation and harvest advanced to the debtor, upon the fruits harvested# $2.Credits for rent for one year, upon the personal property of the lessee e2isting on the immovable leased on the fruits of the same, but not on money or instruments of credit# $%.Claims in favor of the depositor if the depository has wrongfully sold the thing deposited, upon the price of the sale. ,n the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully ta"en, the creditor may demand them from any possessor within thirty (%0) days from the unlawful sei4ures.

General Cate$ories of Credit a Special !referred Credits-.rt ,,/$ and ,,/, (NCC0 Nature of claims or credits- +hey shall be considered as mortgages or pledges of real or personal property. o1a#le Pro'ert,

II.Preferred Credits *it" Res'ect to S'ecific Immo1a#le Pro'ert, $.+a2es due upon the land or building# 200 notes!ta2es must be paid first, after paying ta2es, the balance will be paid in proportion of items enumerated below. 2.Por the unpaid price of real property sold upon the immovable sold#

I.Preferred Credits *it" Res'ect to S'ecific

$.1uties, ta2es and fees due thereon to the state or any subdivision thereof# 200 notes!ta2es must be paid first, after paying ta2es, the balance will be paid in proportion of items enumerated below.

%.Claims of laborers. =asons, mechanics and other wor"men, as well as of architects, engineers and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other wor"s, upon said buildings, canals or other wor"s# (.Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings, canals, and other wor"s, upon said buildings, canals or other wor"s#

2.Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed in the performance of their duties, on the movables, money or securities obtained by them# %.Claims for the unpaid price of movable sold, on said movables, so long as they are in the possession of the debtor, up to the value of the same, and if the movable has been resold by the debtor and the price is still unpaid, the lien may be enforced on the price# this right is not lost by the immobili4ation of the thing by destination, provided it has not lost its form, substance and identity# neither is the right lost by the sale of the thing together with other property for a lump sum, when the price thereof can be determined proportionally#

B.=ortgage credits recorded in the 6egistry of ;roperty, upon the real estate mortgage# ./2penses for the preservation or improvement of real property when the law authori4es reimbursement, upon the immovable preserved or improved# G.Credits annotated in the 6egistry of ;roperty, by virtue of a )udicial order, by attachments or e2ecutions, upon the property affected, and only as to later credits#

F.Claims of co*heirs for warranty in the partition of an immovable among them, upon the real property thus divided# '.Claims of donors or real property for pecuniary charges or other conditions imposed upon the donee, upon the immovable donated# $0.Credits of insurers, upon the property insured, for the insurance premium for two years. ,%%1 Note:+he foregoing enumeration is not an order of preference HCarried 'umber Co# vs# !CC*!$ F% 0C6& ($$ M$'GBN).

F. '. $0. $$. $2. $%. $(.

.egal e2penses and e2penses incurred in the administration of the insolvent7s estate for the common interest of the creditors, when properly authori4ed and approved by the court# +a2es and assessments due to the national government, other than those mentioned in &rticles 22($ -o. $ and &rt. 22(2 -o. $# +a2es and assessments due to any province, other than those mentioned in &rticles 22($ -o. $ and &rt. 22(2 -o. $# +a2es and assessments due to any city or municipality, other than those mentioned in &rticles 22($ -o. $ and &rt. 22(2 -o. $# 1amages for death or personal in)uries caused by a 3uasi* delict# Lifts due to public and private institutions of charity or beneficence# HThis is unbelievableI +o& &ill they find outJ; Credits which, without special privilege, appear in (a) & public instrument# or (b) ,n the final )udgment, if they have been the sub)ect of litigation. +hese credits shall have preference among themselves in the order of priority dates of the instruments and of the )udgments, respectively.

,%%& Note: $.,n contrast with &rticles 22($ and 22(2, &rticle 22(( creates no liens on determinate property which follow such property. What &rticle 22(( creates are simply rights in favor or certain creditors to have the cash and other assets of the insolvent applied in a certain se3uence or order of priority (Republic vs# "eralta, $B0 0C6& %G M$'FGN). 2.&rticle 22(( relates to the property of the insolvent that is not burdened with the liens or encumbrances created or recogni4ed by &rticle 22($ and 22(2. c Common Credits under .rt ,,/1

3rdinar" !referred Credits .rt ,,//

!rt# 9977---With reference to other property, real and personal, of the debtor, the following claims or credits shall be preferred in the order named! $. Compensation due the laborers of their independents under the laws providing for indemnity for damages un cases of labor accident, or illness resulting from the nature of the employment# 200 notes!dapat walang na"a attach na property co4 if meron, compensation due to laborers will not be given priority. 2. %. (. B. . G. ;roper funeral e2penses for the debtor, or children under his or her parental authority who have no property of their own, when approved by the court# Credits for services rendered the insolvent by the employees, laborers or household helpers for one year preceding the commencement of the insolvency proceedings# /2penses during the last illness of the debtor or of his or her spouses and children under his or her parental authority, if they have no property of their own# Credits and advancements made to the debtor for support of himself or herself, and family, during the last preceding insolvency# 0upport during the insolvency proceedings and for % months thereafter# Pines and civil indemnification arising from a criminal offense#

!rt# 9976---Credits of any other "ind or class, or by any other right or title not compromised in the four preceding articles, shall en)oy no preference.

200B -A+/0! & foreclosing ban" creditor cannot be held liable for unpaid wages and the li"e of the employees of the mortgagor. +he employees should file their claims in a proceeding in ban"ruptcy on their employer. (4evelopment -an1 of the "hilippines vs# /ational 'abor Relations Commissions, $F 0C6& F($ M$''0N). **co4 if may attachment ,claim of wor"ers is secondary

Prom the provisions of &rticle $$0 of the .abor Code and 0ection $0, 6ule K,,,, 5oo" ,,, of the 6evised 6ules and 6egulations ,mplementing the .abor Code, a declaration of ban"ruptcy or a )udicial li3uidation must be present before the wor"er7s preference may enforced. H4evelopment -an1 of the "hilippines vs# )antos$ $G$ 0C6& $%F M$'F'N). -"% vs# Court of !ppeals Whenever a distressed corporation as"s 0/C for rehabilitation and suspension of payments, preferred creditor may no longer assert such preference, but shall stand on e3ual footing with other creditors. +his rule will enable the rehabilitation receiver to effectively e2ercise his powers free from )udicial and e2tra)udicial interference that might unduly hinder rescue of the company.

Court issues an order declaring debtor insolvent Arder is published Creditors meet to elect the assignee in insolvency

1ebtor7s properties are conveyed by the cler" of court to the assignee 1ebtor7s assets are li3uidated and debts are paid

Composition, or an agreement where creditors agree to receive less than the amount due them 1ischarge of the debtor on his application Ab)ection, if any to the discharge &ppeal to the 0upreme Court in e2treme cases

200B -A+/0!+he Civil Code and .abor Code provisions re3uire )udicial proceedings in rem in ad)udication of creditor7s claims against the debtor7s assets to become operative. 200B -A+/0!6& G$B e2panded 9wor"er preference: to cover not only unpaid wages but also other monetary claims of laborers, to which even claims of the Lovernment must be deemed subordinate. 200B -A+/0!&mendatory provisions of 6& BG$B which became effective on 2$ =arch $'F' should only be given prospective application.

Effects of Order Declarin$ Insol1enc, &ll the assets of the debtor not e2empt from e2ecution are ta"en possession by the sheriff or until the appointment of a receiver or assignee Porbids the payment of the debtor of any debts due to him and the delivery to the debtor or to any person for him of any property belonging to him and the transfer of any property by him &ll civil proceedings pending against the insolvent debtor shall be stayed =ortgages or pledges, attachments or e2ecutions on property of the debtor duly recorded and not dissolved are -A+ affected by the order IN@OL!NTAR0 INSOL@ENC0

INSOL@ENC0 LA7 ,nsolvency generally denotes the state of a person whose liabilities are more than his assets. <sed interchangeably with ban"ruptcy. ,nsolvency law deals with voluntary and involuntary insolvency and suspension of payments. S)s'ension of Pa,ments 0ec. 2 +he debtor who, possessing sufficient property to cover all his debts, be it an individual person, sociedad or corporation foresees the impossibility of meeting them when they respectively fall due, may petition that he be declared in the state of 0<0;/-0,A- AP ;&@=/-+0 by the court or the )udge thereof in vacation, of the province or city in which he has resided for months ne2t preceeding the filing of his petition.

,nitiated by a petition filed by at least % creditors whose credits accrue in the ;hilippines with an aggregate amount of not less than ;$,000. +he petition must set forth one or more acts of insolvency.

@OL!NTAR0 INSOL@ENC0 1ebtor files petition for voluntary insolvency with the 6+C (debt must be T;$,000)

Acts of Insol1enc, 0uch person is about to depart or has departed from the country with intent to defraud his creditors# +hat being absent from the country, he remains absent# +hat he conceals himself to avoid the service of legal process to delay or defraud creditors# 8e conceals or is removing any of his property to avoid its being attached or ta"en on legal process# 8e has suffered his property to remain under attachment or legal process for % days for the purpose of hindering or delaying or defrauding his creditors# 8e has confessed or offered to allow )udgment in favor of any creditor or claimant for the purpose of hindering or delaying or defrauding any creditor or claimant#

 8e has willfully suffered )udgment to be ta"en against him for default for the purpose of hindering or delaying or defrauding his creditors# 8e has suffered or procured his property to be ta"en or legal process with intent to give a preference to one or more of his creditors and thereby hinder, delay or defraud any of his creditors# 8e has made any assignment, gift, sale, conveyance or transfer of his estate, property, rights or credits with intent to delay, defraud or hinder his creditors# 8e has, in contemplation of insolvency, made any payment, grant, sale, conveyance or transfer of his estate, property, rights or credits with intent to delay, defraud or hinder his creditors# +hat being a merchant or tradesman he has generally defaulted in the payment of his current obligations for a period of %0 days# +hat for a period of %0 days he has failed after demand, to pay any moneys deposited with him or received by him in a fiduciary capacity# and &n e2ecution having been issued against him on final )udgment for money, he was found to be without sufficient property sub)ect to e2ecution to satisfy )udgment.

@OL!NTAR0 @ IN@OL!NTAR0 INSOL@ENC0 Ane creditor is sufficient ,nsolvent debtor files the petition De#tor m)st not #e $)ilt, of an, act of insol1enc, &t least % creditors must file the petition +hree or more creditors who meet the re3uirements file the petition De#tor m)st #e $)ilt, of an, act of insol1enc,

De#t m)st #e EP.3444 Bond is not re2)ired

De#t m)st #e P.3444 or a#o1e Bond is re2)ired

An ad=)dication of insol1enc, ma, #e $ranted ex parte Ad=)dication of insol1enc, $ranted onl, after "earin$

Petition is filed *it" RTC of 'ro1ince or cit, *"ere de#tor "as resided for ; mont"s Declaration of insol1enc, is made )'on filin$ of 1ol)ntar, insol1enc,

Len$t" of residence is immaterial Declaration of insol1enc, is made after "earin$

S!SPENSION O> PA0 ENT @ INSOL@ENC0 ;urpose is to suspend or delay payment of debts 1ebtor has sufficient property to pay his debts &mount of indebtedness is not affected -umber of creditors is immaterial ;urpose is to discharge debtor from payment of debts 1ebtor does not have sufficient property to pay his debts Creditors receive less than their credits A6 may not receive anything at all in case of preferred credits ,n voluntary! $ creditor ,nvoluntary! % or more creditors