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CATEGORY

GUARANTY

SURETYSHIP

LAW

CIVIL CODE
Articles 2047-2084

DEFINITION

By guaranty a
person, called the
guarantor, binds
himself to the
creditor to fulfill the
obligation of the
principal debtor in
case the latter should
fail to do so. Art.
2047 (1)

The second
paragraph of
Article 2047
states the law
applicable to the
contract of
suretyship. It
covers Articles
1207 to 1222,
Title I
(Obligations),
Chapter 3
(Different Kinds
of Obligations),
Section 4 (Joint
and Solidary
Obligations),
Book IV
(Obligations and
Contracts) of the
CIVIL CODE
If a person binds
himself
solidarily with
the principal
debtor, the
provisions of
Section 4,
Chapter 3,
Title 1 of this
Book shall be
observed. In
such case the
contract is called

PLEDGE

MORTGAGE
CHATTEL
REAL
MORTGAGE
ESTATE
MORTGAGE
CIVIL CODE
CIVIL CODE
CIVIL CODE
Articles 2085Articles 2085-2092
Articles
2123
2140-2141 THE
2083-2092
CHATTEL
2124-2131
MORTGAGE LAW
SUPREME
(Act No. 1508, as
COURT A.M.
amended)
NO. 99-10-050 AS
AMENDED
BY
RESOLUTION
OF JUNE 30,
2001 AND
AUGUST 7,
2002
JUDICIAL
FORECLOSU
RE OF REAL
ESTATE
MORTGAGE
(Rule 68, ROC)
It is a contract by By a chattel
A real estate
virtue of which
mortgage, personal
mortgage is a
the debtor
property is recorded
contract
delivers to the
in the Chattel
whereby the
creditor or to a
Mortgage Register as debtor secures
third person a
a security for the
to the creditor
movable
performance of an
the fulfillment
or a document
obligation. If the
of a principal
involving
movable, instead of
obligation,
incorporeal rights being recorded, is
specially
for the purpose of delivered to the
subjecting to
securing the
creditor or a third
such security
fulfillment of a
person,
immovable

ANTICHRESIS

CIVIL CODE
Articles
2085-2092
2132-2139

By the contract of
antichresis the
creditor acquires
the right to receive
the fruits of an
immovable of his
debtor, with the
obligation to app
apply them to the
payment of the
interest, if
owing, and
thereafter to the

PURPOSE

PARTIES
SUBJECT MATTER

Special promise to
answer for the debt,
default or
miscarriage of
another
Guarantor, Creditor
& Debtor
personal: the
guaranty is the credit
given by the person
who guarantees the
fulfillment of the
principal obligation
(guarantor)
real: the guaranty is
property. If the
guaranty is
immovable property:
real mortgage
or antichresis; If the
guaranty is movable
property: pledge or
chatter mortgage

a suretyship.
(Art. 2047 (2))

principal
obligation with
the understanding
that when the
obligation is
fulfilled, the
thing delivered
shall be returned
with all its fruits
and accessions.

Surety promises
to answer for the
debt, default or
miscarriage of
the principal.
Obligor, surety
and obligee
personal: the
guaranty is the
credit given by
the person who
guarantees the
fulfillment of the
principal
obligation
(guarantor)

To secure
fulfillment of a
principal
obligation.

real: the
guaranty is
property. If the
guaranty is
immovable
property: real
mortgage
or antichresis; If
the guaranty is
movable

Incorporeal
rights (Art.
2095. )

Pledgor &
Pledgee
All movables,
which are
within
commerce, may
be pledged,
provided they
are susceptible
of possession.
(Art. 2094)

the contract is a
pledge and not a
chattel mortgage.
(Art. 2140)

property
or real rights
over
immovable
property in
case the
principal
obligation is
not complied
with at the
time stipulated.
To secure fulfillment
To secure
of principal obligation fulfillment of
principal
obligation

principal of his
credit. (Art. 2132.)

Mortgagor & Mortgagee

Creditor & Debtor

personal or movable
property.

1. Immovables
2. Alienable
rights imposed
upon
immovables

It secures the
performance of a
principal
obligation

Immovables or
Real Property

property: pledge
or chatter
mortgage
KINDS/
CLASSIFICATION

1. Conventional- one
constituted by
agreement of the
parties (art. 2051,
par. 1)

1. Voluntary or
conventional
(created by
agreement of the
parties);
2. Legal (by
operation of law).

2. Legal- one
imposed by virtue of
a provision of law;
(Ibid)
3. Judicial- one
required by a court to
guarantee the
eventual right of one
of the parties in a
case.

1. Accessory: It is
NATURE AND
CHARACTERISTICS dependent for its

existence upon the


principal obligation
guaranteed by it.
2. Subsidiary and
Conditional: It takes
effect only when the
principal debtor fails in
his
obligation.
3. Unilateral:
a. It gives rise to

1. Contractual and
Accessory BUT
Direct: The
contractual
obligation of the
surety is merely
an accessory or
collateral to the
obligation
contracted by the
principal. BUT, his
liability to the
creditor is direct,

Real, because it
is perfected by
delivery of the
thing pledged.
2. Acessory,
because it has no
independent
existence.
3. Unilateral,
because it creates

1. It is an accessory
contract because it
secures performance
of a principal
obligation
2. It is a formal
contract because it
requires registration
in the Chattel
Mortgage

1. Voluntary
Agreed to
between the
parties or
constituted by
the will of the
owner of the
property
2. Legal
Required by
law to be
executed in
favor of certain
persons
3. Equitable
Lacks the
proper
formalities of
mortgage but
shows the
intention of the
parties to make
the property as
a security for a
debt
Mortgage is a
real, accessory,
and subsidiary
contract

1. Accessory It
secures the
performance of a
principal
obligation.
Manresa,
however,
believes that it is
an independent
contract.

obligations on the part of


the guarantor in relation
to the creditor and
not vice-versa. (Although
after its fulfillment, the
principal debtor should
indemnify
the guarantor, but this
obligation is only
incidental)
b. It may be entered into
even without the
intervention of the
principal debtor.
4. Distinct Person: It
requires that the person
of the guarantor must be
distinct from the
person of the principal
debtor (you cannot
guaranty your own debt).
However, in a real
guaranty, a person may
guarantee his own
obligation with his own
properties.
GENERAL RULE:
Guaranty is gratuitous.
EXCEPTION: Guaranty
is onerous only if it is
stipulated guarantee is
given.

primary, and
absolute.
2. Liability is
limited by the terms
of the contract: The
extent of a suretys
liability is
determined only by
the terms of the
contract and cannot
be extended by
implication.
3. Liability arises
only if principal
debtor is held liable:
If the principal
debtor and the
surety are held
liable, their liability
to pay the creditor
would be solidary.
But, the surety does
not incur liability
unless and until the
principal debtor is
held liable.
4. Surety is not
entitled to
exhaustion: A surety
is not entitled to the
exhaustion of the
properties of the
principal debtor
since the surety
assumes a solidary
liability for the
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

an obligation
solely on the part
of the creditor to
return the
thing pledged
upon fulfillment
of the principal
obligation.
4. Subsidiary,
because the
obligation of the
creditor does not
arise until
fulfillment of the
principal
obligation.

Register for its


validity (but only
against third
persons)
3. It is a unilateral
contract because it
produces only
obligations on the
part of
the creditor to free
the thing from the
encumbrance on
fulfillment of the
obligation.

2. Formal
Contract It must
be in specified
form to be valid
(in writing).
3. A third person,
who is not a party
to the principal
contract, may
offer his
immovable
under the contract
of antichresis to
secure the debt of
another. (2085)
4. The contract of
antichresis is
indivisible. (2089)
5. The
indivisibility of
the antichresis is
not affected by the
fact that the
debtors are not
solidarily liable.
(2090)
6. The contract of
antichresis may
secure all kinds of
obligations pure
or conditional.
(2091)

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

FORMALITY

Must be in writing to Must be in


be enforceable. It is
writing
govern by the Statute
of Frauds.

LIABILITY

Real There
must be delivery
of the thing.

CONSENSUAL

REAL
CONTRACT
BUT NO
DELIVERY

Delivery is not
required for the
validity of the
contract itself.
BUT, it is required
in order that the
creditor may
receive the fruits.
CONSENSUAL

Must be in
writing

Must be in writing, a
specific form is
required.

Must be in
writing, a
specific form is
required.

Must be in
writing, otherwise
it is void.

No registration
needed

Formal
Registered in chattel
mortgage register

Formal
Written or oral But
the oral mortgage
is not binding
against third
persons.
Registered public
document

The amount of the


principal and of the
interest shall be
specified in writing;
otherwise, the contract
of antichresis shall be
void (Art. 2134).

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 latters obligations nor does he receive any benefit therfrom. (Garcia, Jr. Vs. CA)

DELIVERY

Delivery is not
necessary

Delivery of
the thing is

Delivery of the thing In Chattel Mortgage,


pledge is necessary. delivery of the personal

In Real
Mortgage,

Delivery may or
may not be

not necessary

OWNERSHIP

The guarantor need


not be the owner.

VALIDITY

The contract of
guaranty is valid
only between the
contracting parties.

PROHIBITION

RIGHTS AND
OBLIGATIONS OF
THE PARTIES

Against unjust
enrichment

Guarantor:
1) Guarantor
cannot
be
compelled to
pay
the
creditor
unless
the
latter
has
exhausted all
the property
of the debtor
and
has
resorted to all
the
legal
remedies
against
the
debtor.
Creditor:

Obligorundertakes
an
obligation;
he is the
principal
obligor
Surety- a
person who
engages
himself to be
answerable
to a third
person for
debt, default,
miscarriage
of another.

property to the
mortgage is not
necessary.

delivery is not
necessary.

necessary.

Pledgor must be the


owner of the thing
pledge, otherwise
the pledge is void.
Not valid against
third persons unless
a description of the
thing pledged and
the date of the
pledge appear in a
public instrument.
Against Pactum
Commissorium

Mortgagor must be the owner of the


thing mortgaged, otherwise the mortgage
is void.

Against Pactum Commissorium

Against Pactum
Commissorium
Against Usurious
Rates

Pledgors Rights:
1) To demand the
return in case of
reasonable
grounds to fear
destruction or
impairment of
the thing
without the
pledgees fault,
subject to the
duty of
replacement.
2) To bid and be
preferred at the
public auction.
3) To alienate the
thing pledged
provided the
pledgee consent
to the sale.
4) To ask that the

In Chattel Mortgage:

Creditor:
1) To pay the
taxes and
charges
upon the
estate
unless
there is a
contrary
stipulation.
2) To pay
expenses
for
necessary
repairs.
Debtor:
To pay what he
owes the creditor

In Chattel Mortgage,
not valid against third
person unless
registered in the
Chattel Mortgage
Register.

In Real
Mortgage, not
valid against
third persons if
not registered.

In Real Mortgage,
Mortgagors Right:
1) To alienate the thing mortgaged
property but the mortgage shall
remain attached to the property.
A stipulation forbidding the owner from
alienating the immovable mortgage shall
be void being contrary to public policy
inasmuch as the transmission of property
should not be unduly impede.
Mortgagees Right:
1) To claim from third a person in
possession of the mortgaged
property the payment of the part
of the credit secured by which

Creditor must be
the owner
The contract is
valid only
between the
parties.

1) Exhaust all
the property
of the debtor
unless
the
guarantor is
not entitled to
such benefit
under
art.
2059.
2) Resort to all
the
legal
remedies
against
the
debtor.
3) Prove that the
debtor is still
unable to pay.
Debtor:
Payment of his
principal obligation.

Obligee- to
whom the
obligation is
made.

thing pledged
be deposited in
one of the
following
cases:
a) F the creditor
uses the thing
without
authority.
b) He misuses the
thing.
c) The thing is
endangered of
being lost or
impaired
because of
negligence or
willful act of
the pledgee.
Pledgors Obligations:
1) To advise the
pledgee of the
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.
Pledgees Rights:
1) Option to
demand
replacement or
immediate
payment of the
debt in case of
deception as to
substance or

said third person possesses.


in
order
to
It is necessary that prior demand for reacquire
the
payment must have been made on the enjoyment of the
debtor and the latter failed to pat.
immovable.

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
guarantor:
1) Right
of
indemnity or
reimbursement
2) Right
of
subrogation

Other remedies:
1) Obtain release
from
the
guaranty.

Demand a security
that shall protect him
from
any

Sale of the thing


pledged at a public
auction. In case of
legal pledge, it can
be made from the
date of demand
otherwise; the
debtor may require
the return of the
thing.

Foreclosure of Chattel Mortgage by


public auction under Act 1508 but the
parties may stipulate that it may be by
private sale.

1) Action for
specific
performanc
e
2) Petition for
the sale of
the
mortgages
under Rule
68 of the
Rules of
Court.
3) Judicial
Foreclosure

SPECIAL
REQUISITES

proceedings by the
creditor and against
the
danger
of
insolvency of the
debtor.
1)
A guaranty
cannot exist
without
a
valid
obligation.
2) May also be
given as security for
future debts.

1. Possession of In Chattel Mortgage,


the thing pledged
1) It can cover
must
be
only personal
transferred to the
or
movable
creditor or a third
property
in
person
by
general;
agreement
however, the
2) Subject
parties
may
matter:
treat
as
movable
and
personal
incorporeal rights
property that
evidenced
by
which by its
documents of the
nature would
title
and
the
be
real
instruments
property.
proving the right
2) Registration
pledged shall be
of
the
delivered to the
mortgage
creditor and if
with
the
negotiable must
Chattel
be endorsed.
Mortgage
The description of
Register
the thing pledged
where
the
and the date of must
mortgagor
appear in a public
resides;
if
property
is
instrument to bind
located in a
third persons but not
different
for the validity of
province,
the contract.
registration in
both
provinces
is
required.
3) Description of
the property
as
would

In
Real
Mortgage,
1) It can
cover
only
immo
vable
proper
ty and
aliena
ble
real
rights
impos
ed
upon
immo
vable.
2) It
must
appea
r in a
public
instru
ment.

1) It
can
cover
only the
fruits of
an
immovabl
e
property
2) Delivery
of
the
immovabl
e
is
necessar
y for the
creditor
to receive
the fruits
and not
that the
contract
shall be
biding.
3) Amount
of
the
principal
and
interest
must be
specified
in writing.

Registration in
the registry of
property
is
necessary to
bind
third
Express agreement
persons but not
that debtor will
for the validity
give possession of
of the contract.
the property to
creditor and that
the latter will

enable
the
parties
or
other persons
to identify the
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 favor


OF A CONTRACT
of one of the
guarantors,
without
the
consent of the
other, benefits all
to the extent of
the share of all
the guarantor to
whom it has been
granted.
2) If the creditor
voluntarily
accepts
immovable
or

1) For the
same
causes as
all other
obligations.
2) Return of
the thing
pledged by
the
pledgee to
the
pledgor.
3) Statement
in writing
by the
pledge that

1) Foreclosure
of
the
thing
mortgaged.
Judicial ordinary action for foreclosure
under Rule 68 of the Rules of Court
Extra-judicial when mortgagee is given
a special power of attorney to sell the
mortgaged property by public auction
under Act No. 3135

apply the fruits to


the interest if any
ten to the principal
of his credit.

The debtor shall


have the right
to
the
extinguishment
of the pledge or
mortgage
as
the portion of
the debt for
which
each
thing
is
especially
answerable
is
satisfied.

other properties
in payment of the
debt, even if he
should afterwards
lose the same
trough eviction or
conveyance
of
property.
3) Whenever by
some act of
the creditor,
the
guarantors
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

he
renounces
or
abandons
the pledge.
4) Payment of
the debt.
5) Sale of the
thing
pledged at
public
auction.
Appropriation under
Art. 2112.

guarantor.