CATEGORY GUARANTY SURETYSHIP PLEDGE MORTGAGE ANTICHRESIS CHATTEL REAL MORTGAGE ESTATE MORTGAGE LAW CIVIL CODE The second CIVIL CODE CIVIL CODE CIVIL CODE CIVIL CODE Articles 2047-2084 paragraph of Articles 2085- Articles 2085-2092 Articles Articles Article 2047 2123 2140-2141 THE 2083-2092 2085-2092 states the law CHATTEL 2124-2131 2132-2139 applicable to the MORTGAGE LAW SUPREME contract of (Act No. 1508, as COURT A.M. suretyship. It amended) NO. 99-10-05-0 covers Articles AS 1207 to 1222, AMENDED Title I BY (Obligations), RESOLUTION Chapter 3 OF JUNE 30, (Different Kinds 2001 AND of Obligations), AUGUST 7, Section 4 (Joint 2002 and Solidary JUDICIAL Obligations), FORECLOSU Book IV RE OF REAL (Obligations and ESTATE Contracts) of the MORTGAGE CIVIL CODE (Rule 68, ROC) DEFINITION By guaranty a person, If a person binds It is a contract by By a chattel mortgage, A real estate By the contract of called the guarantor, himself solidarily virtue of which personal property is mortgage is a antichresis the binds himself to the with the principal the debtor recorded in the Chattel contract creditor acquires creditor to fulfill the debtor, the delivers to the Mortgage Register as whereby the the right to receive obligation of the provisions of creditor or to a a security for the debtor secures the fruits of an principal debtor in Section 4, third person a performance of an to the creditor immovable of his case the latter should Chapter 3, movable obligation. If the the fulfillment debtor, with the fail to do so. Art. Title 1 of this or a document movable, instead of of a principal obligation to app 2047 (1) Book shall be involving being recorded, is obligation, apply them to the observed. In such incorporeal rights delivered to the specially payment of the case the contract for the purpose of creditor or a third subjecting to interest, if is called a securing the person, such security owing, and suretyship. (Art. fulfillment of a the contract is a immovable thereafter to the 2047 (2)) principal pledge and not a property principal of his obligation with chattel mortgage. (Art. or real rights credit. (Art. 2132.) the understanding 2140) over that when the immovable obligation is property in case fulfilled, the thing the principal delivered obligation is shall be returned not complied with all its fruits with at the and accessions. time stipulated. PURPOSE Special promise to Surety promises To secure To secure fulfillment To secure It secures the answer for the debt, to answer for the fulfillment of a of principal obligation fulfillment of performance of a default or miscarriage debt, default or principal principal principal of another miscarriage of obligation. obligation obligation the principal. PARTIES Guarantor, Creditor Obligor, surety Pledgor & Mortgagor & Mortgagee Creditor & Debtor & Debtor and obligee Pledgee SUBJECT MATTER personal: the personal: the All movables, personal or movable 1. Immovables Immovables or guaranty is the credit guaranty is the which are property. 2. Alienable Real Property given by the person credit given by within rights imposed who guarantees the the person who commerce, may upon fulfillment of the guarantees the be pledged, immovables principal obligation fulfillment of the provided they (guarantor) principal are susceptible obligation of possession. real: the guaranty is (guarantor) (Art. 2094) property. If the guaranty is real: the guaranty Incorporeal immovable property: is rights (Art. real mortgage property. If the 2095. ) or antichresis; If the guaranty is guaranty is movable immovable property: pledge or property: real chatter mortgage mortgage or antichresis; If the guaranty is movable property: pledge or chatter mortgage KINDS/ 1. Conventional- one 1. Voluntary or 1. Voluntary – CLASSIFICATION constituted by conventional Agreed to agreement of the (created by between the parties (art. 2051, agreement of the parties or par. 1) parties); constituted by 2. Legal (by the will of the 2. Legal- one operation of law). owner of the imposed by virtue of property a provision of law; 2. Legal – (Ibid) Required by law to be 3. Judicial- one executed in required by a court to favor of certain guarantee the persons eventual right of one 3. Equitable – of the parties in a Lacks the case. proper formalities of mortgage but shows the intention of the parties to make the property as a security for a debt NATURE AND 1. Accessory: It is 1. Contractual and Real, because it is 1. It is an accessory Mortgage is a 1. Accessory – It CHARACTERISTICS dependent for its Accessory BUT perfected by contract because it real, accessory, secures the existence upon the Direct: The principal obligation contractual delivery of the secures performance and subsidiary performance of a guaranteed by it. obligation of the thing pledged. of a principal contract principal 2. Subsidiary and surety is merely 2. Acessory, obligation obligation. Conditional: It takes an accessory or because it has no 2. It is a formal Manresa, however, effect only when the collateral to the independent contract because it believes that it is principal debtor fails in obligation existence. requires registration an independent his contracted by the obligation. principal. BUT, his 3. Unilateral, in the Chattel contract. 3. Unilateral: liability to the because it creates Mortgage 2. Formal a. It gives rise to creditor is direct, an obligation Register for its Contract – It must obligations on the part of primary, and the guarantor in relation absolute. solely on the part validity (but only be in specified to the creditor and 2. Liability is limited of the creditor to against third form to be valid not vice-versa. (Although by the terms of the after its fulfillment, the contract: The extent return the persons) (in writing). principal debtor should of a surety’s liability thing pledged 3. It is a unilateral 3. A third person, indemnify is upon fulfillment contract because it who is not a party the guarantor, but this determined only by of the principal produces only to the principal obligation is only the terms of the obligation. obligations on the contract, may offer incidental) contract and cannot 4. Subsidiary, part of his immovable b. It may be entered into be extended by even without the implication. because the the creditor to free under the contract intervention of the 3. Liability arises obligation of the the thing from the of antichresis to principal debtor. only if principal creditor does not encumbrance on secure the debt of 4. Distinct Person: It debtor is held liable: arise until fulfillment of the another. (2085) requires that the person If the principal fulfillment of the obligation. 4. The contract of of the guarantor must be debtor and the distinct from the surety are held principal antichresis is person of the principal liable, their liability obligation. indivisible. (2089) debtor (you cannot to pay the creditor 5. The guaranty your own debt). would be solidary. indivisibility of the However, in a real But, the surety does antichresis is not guaranty, a person may not incur liability guarantee his own unless and until the affected by the fact obligation with his own principal debtor is that the debtors are properties. held liable. not 4. Surety is not solidarily liable. GENERAL RULE: entitled to (2090) Guaranty is gratuitous. exhaustion: A surety EXCEPTION: Guaranty is not entitled to the 6. The contract of is onerous only if it is exhaustion of the antichresis may stipulated guarantee is properties of the secure all kinds of given. principal debtor obligations – pure since the surety or conditional. assumes a solidary liability for the (2091) fulfillment of the principal obligation. 5. The undertaking is to the CREDITOR, not to the principal debtor: The debtor cannot claim that the surety breached its obligation to pay for the principal obligation because there is no obligation as between the surety and the debtor. If the surety does not pay, the principal debtor is still not relieved of his obligation. PERFECTION CONSENSUAL CONSENSUAL Real – There must CONSENSUAL REAL Delivery is not be delivery of the CONTRACT required for the thing. BUT NO validity of the DELIVERY contract itself. BUT, it is required in order that the creditor may receive the fruits. CONSENSUAL

FORMALITY Must be in writing to Must be in Must be in Must be in writing, a Must be in Must be in writing, be enforceable. It is writing writing specific form is writing, a otherwise it is govern by the Statute required. specific form is void. of Frauds. No registration required. needed Formal The amount of the Registered in chattel Formal principal and of the mortgage register Written or oral interest shall be But the oral specified in writing; mortgage is not otherwise, the contract binding against of antichresis shall be third persons. void (Art. 2134). Registered public document LIABILITY Serves as an accessory contract *with regard to suretyship it is contractual and accessory but direct. In other words he is directly, primarily and equally bound with the principal as original promisor although he possesses no direct or personal interest over the latter’s obligations nor does he receive any benefit therfrom. (Garcia, Jr. Vs. CA)

DELIVERY Delivery is not Delivery of Delivery of the thing In Chattel Mortgage, In Real Delivery may or necessary the thing is pledge is necessary. delivery of the personal Mortgage, may not be not necessary property to the delivery is not necessary. mortgage is not necessary. necessary.

OWNERSHIP The guarantor need Pledgor must be the Mortgagor must be the owner of the thing Creditor must be not be the owner. owner of the thing mortgaged, otherwise the mortgage is the owner pledge, otherwise the void. pledge is void. VALIDITY The contract of Not valid against In Chattel Mortgage, In Real The contract is guaranty is valid only third persons unless not valid against third Mortgage, not valid only between between the a description of the person unless registered valid against the parties. contracting parties. thing pledged and in the Chattel Mortgage third persons if the date of the Register. not registered. pledge appear in a public instrument. PROHIBITION Against unjust Against Pactum Against Pactum Commissorium Against Pactum enrichment Commissorium Commissorium Against Usurious Rates

RIGHTS AND Guarantor: Obligor- Pledgor’s Rights: In Chattel Mortgage: Creditor: OBLIGATIONS OF 1) Guarantor undertakes an 1) To demand the 1) To pay the return in case of THE PARTIES cannot be obligation; he reasonable taxes and compelled to is the grounds to fear In Real Mortgage, charges pay the principal destruction or Mortgagor’s Right: upon the creditor obligor impairment of 1) To alienate the thing mortgaged estate unless the the thing property but the mortgage shall unless latter has Surety- a without the remain attached to the property. there is a pledgee’s fault, exhausted all person who subject to the A stipulation forbidding the owner from contrary the property engages duty of alienating the immovable mortgage shall stipulation. of the debtor himself to be replacement. be void being contrary to public policy 2) To pay and has answerable to 2) To bid and be inasmuch as the transmission of property expenses resorted to all a third person preferred at the should not be unduly impede. for public auction. the legal for debt, 3) To alienate the Mortgagee’s Right: necessary remedies default, thing pledged 1) To claim from third a person in repairs. against the miscarriage provided the possession of the mortgaged Debtor: debtor. of another. pledgee consent property the payment of the part To pay what he Creditor: to the sale. of the credit secured by which owes the creditor 4) To ask that the 1) Exhaust all Obligee- to thing pledged said third person possesses. in order to the property whom the be deposited in It is necessary that prior demand for reacquire the of the debtor obligation is one of the payment must have been made on the enjoyment of the following unless the made. cases: debtor and the latter failed to pat. immovable. guarantor is a) F the creditor not entitled to uses the thing such benefit without under art. authority. 2059. b) He misuses the thing. 2) Resort to all c) The thing is the legal endangered of remedies being lost or against the impaired debtor. because of negligence or 3) Prove that the willful act of debtor is still the pledgee. unable to pay. Debtor: Pledgor’s Obligations: Payment of his 1) To advise the pledgee of the principal obligation. flaws of the thing. 2) Not to demand the return of the thing until after full payment of the debt, including interest due thereon and expenses incurred for this preservation.

Pledgee’s Rights: 1) Option to demand replacement or immediate payment of the debt in case of deception as to substance or quality. 2) To sell at public auction in case of reasonable grounds to fear destruction or impairment of the thing without his fault. 3) To bring actions pertaining to the owner or to defend it against third persons. 4) To choose which of several things pledged shall be sold. 5) To collect and receive amount due on credit pledged. 6) To bid at public auction, unless he is the only bidder. To appropriate the thing REMEDIES In case of paying Sale of the thing Foreclosure of Chattel Mortgage by 1) Action for guarantor: pledged at a public public auction under Act 1508 but the specific 1) Right of auction. In case of parties may stipulate that it may be by performanc indemnity or legal pledge, it can private sale. e reimbursement be made from the 2) Petition for the sale of 2) Right of date of demand subrogation the otherwise; the debtor mortgages Other remedies: may require the 1) Obtain release under Rule return of the thing. from the 68 of the guaranty. Rules of Demand a security Court. that shall protect him 3) Judicial Foreclosure from any proceedings by the creditor and against the danger of insolvency of the debtor. SPECIAL 1) A guaranty 1. Possession of In Chattel Mortgage, In Real 1) It can REQUISITES cannot exist the thing pledged 1) It can cover Mortgage, cover without a must be only personal 1) It can only the valid transferred to the or movable cover fruits of obligation. creditor or a third property in only an person by 2) May also be general; immov immovabl agreement e given as security for however, the able 2) Subject parties may property future debts. proper matter: treat as ty and 2) Delivery movable and personal aliena of the incorporeal rights property that ble immovabl evidenced by which by its real e is documents of the nature would rights necessary title and the be real impos for the instruments property. ed creditor proving the right 2) Registration upon to receive pledged shall be of the immov the fruits delivered to the mortgage able. and not creditor and if with the 2) It that the negotiable must Chattel must contract be endorsed. Mortgage appea shall be The description of Register r in a biding. the thing pledged where the public 3) Amount and the date of must mortgagor instru of the appear in a public resides; if ment. principal instrument to bind property is Registration in and third persons but not located in a the registry of interest for the validity of the different property is must be contract. province, necessary to specified in writing. registration in bind third both Express agreement persons but not provinces is that debtor will for the validity required. give possession of of the contract. 3) Description of the property to the property creditor and that as would the latter will enable the apply the fruits to parties or the interest if any other persons ten to the principal to identify the of his credit. same after reasonable investigation and inquiry. 4) Accompanied by an affidavit of good faith to bind thirds persons but not for the validity of the contract. 5) It can cover only obligations existing at the time the mortgage s constituted.

EXTINGUISHMENT 1) Release in 1) For the 1) Foreclosure of the thing The debtor shall OF A CONTRACT favor of one of same mortgaged. have the right to the guarantors, causes as Judicial – ordinary action for foreclosure the without the all other under Rule 68 of the Rules of Court extinguishment consent of the obligations. of the pledge or other, benefits all 2) Return of Extra-judicial – when mortgagee is given mortgage as the the thing portion of the to the extent of a special power of attorney to sell the pledged by debt for which the share of all the pledgee mortgaged property by public auction each thing is the guarantor to to the under Act No. 3135 especially whom it has been pledgor. answerable is granted. 3) Statement satisfied. 2) If the creditor in writing voluntarily by the accepts pledge that immovable or he other properties in renounces payment of the or debt, even if he abandons should afterwards the pledge. lose the same 4) Payment of trough eviction or the debt. conveyance of 5) Sale of the property. thing pledged at 3) Whenever by public some act of auction. the creditor, Appropriation under the guarantors Art. 2112. even though they are solidarily liable cannot be subrogated to the rights, mortgages and preferences of the former. 4) For the same causes as all other obligations under art. 1231. 5) When the principal obligation is extinguished. 6) Extension granted to the debtor by the creditor without the consent of the guarantor.