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Rights of a third person who pledges his own movable property to secure the debt of another Extinguishment of pledge
1. To be indemnified by the debtor if he pays the creditor. The indemnity consists of the Pledge may be extinguished directly or indirectly.
following: 1. Indirect cause - When the principal obligation secured by the pledge is extinguished, the
a. The total amount of the debt. pledge, being merely an accessory contract, is likewise extinguished.
b. The legal interests thereon from the time the payment was made known to the debtor, Any third person who has any right in or to the thing pledged may satisfy the principal
even though it did not earn interest for the creditor. obligation as soon as the latter becomes due and demandable. (Art. 2117)
c. The expenses incurred by the pledgor after having notified the debtor that payment had Example: D owes C P5,000.00. The debt is secured by a pledge of D's wristwatch. If D
been demanded of him. pays C P5,000.00, the debt is extinguished together with the pledge.
d. Damages, if they are due. (Arts. 2066, 2120))
2. Direct causes - Pledge may be extinguished directly as follows:
2. To be subrogated to all the rights of the creditor against the debtor if he pays the creditor. a. Return by the pledgee of the thing pledged to the pledgor or owner
(Arts. 2067, 2120) 1) Any stipulation that the pledge is not extinguished by the return of the thing is void.
The pledgor is considered a third person interested in the fulfillment of the obligation; 2) Prima facie presumption that pledgee returned the thing pledged
hence, he is entitled to be subrogated to the creditor's rights upon payment. (See Arts. 1236 a) If the thing pledged is found in the possession of the pledgor or owner.
and 1302.) b) If the thing pledged is in the possession of a third person who has received it
Example: D obtained a loan of P10,000.00 from C. The debt is secured by the guarantee from the pledgor or owner. (Art. 2110)
of G and the pledge by T of his ring.
b. Renunciation or abandonment in writing by the pledgee of the pledge.
1) The acceptance by the pledgor or owner of the renunciation, or the return of the belongs to C unless the parties had an agreement that any excess shall be turned
thing pledged, is not necessary for such mode of extinguishing pledge. over to D.
2) The pledgee becomes a depositary upon renunciation (Art. 2111) if in the meantime, 5) Rule when two or more things are pledged
the thing pledged is not yet returned to the owner. The pledgee may choose which he will cause to be sold, unless there is a
c. Sale of the thing pledged contrary stipulation. He may demand the sale of only as many of the things as are
necessary for the payment of the debt. (Art. 2119)
1) Formalities of the sale - The sale shall be: d. Appropriation of the thing pledged
a) By public auction, If the thing pledged is not sold in the first and second public auctions, the creditor
b) Through a notary public, and may appropriate the thing pledged. In this case, he shall be obliged to give an
acquittance for his entire claim. (Art. 2112)
c) With notice to the debtor and the owner of the thing pledged, stating the amount
for which the public sale is to be held. (Art. 2112)
Note: The sale of the thing pledged or its appropriation will result in the extinguishment not
2) Who may bid at the public auction only of the pledge but also of the principal obligation.
a) The pledgor or owner.
He shall be preferred if he should offer the same terms as the highest Legal Pledge
bidder. Legal pledge, concept
Legal pledge or pledge by operation of law refers to the right of a person to retain a thing until
b) The pledgee.
he receives payment of his claim.
However, his offer shall not be valid if he is the only bidder. (Art. 2113)
c) Third persons. Examples of legal pledge
3) Required amount of bids 1. Possessory lien by a possessor in good faith
A possessor in good faith may retain the movable upon which he has incurred necessary
All bids shall offer to pay the purchase price at once. If any other bid is accepted, and useful expenses until he has been reimbursed therefor. (Art. 546)
the pledgee is deemed to have received the purchase price, as far as the pledgor or
owner is concerned. (Art. 2114)
Example:
4) Effects of sale B bought a bicycle from S believing that S was the owner. After obtaining possession of
The principal obligation shall be extinguished whether or not the proceeds of the the bicycle, B incurred P1,000.00 to have it repaired by causing the removal of rust from it and
sale are equal to the amount of the principal obligation, interest and expenses in a replacing some deteriorating parts. Later, O came forward and proved that he was the owner
proper case. (Art. 2115) and that S merely deceived B. B is entitled to retain the bicycle (by way of legal pledge) until
a) If the price is more than the amount of the obligation, the debtor shall not be O has reimbursed him the amount of P1,000.00 for the j necessary and useful expenses that
entitled to the excess, unless there is an agreement to that effect. he had incurred.
b) If the price is less, the creditor cannot recover the deficiency even if stipulated.
(Art. 2115) 2. Possessory lien of worker
He who has executed work upon a movable has a right to retain it by way of pledge until
Example: he is paid. (Art. 1731)
D owes C P10,000.00. The debt is secured by a pledge of D's shares of stock
which is evidenced by a stock certificate delivered by D to C at the time D received Example:
the proceeds. If D defaults and C sells the shares of stock at P9,500.00, D's debt O brought his wristwatch to R for repair. R has the right to retain the wristwatch by way
is extinguished. C cannot recover the deficiency of P500.00. If the shares of stock of legal pledge until O has paid him for the repair work he has undertaken.
are sold at P11,000.00, D's debt is likewise extinguished. The excess of P1,000.00
3. Depositary's right of retention 4. That the document in which the mortgage appears be recorded in the Registry of Property.
The depositary may retain the thing deposited until the full payment of what may have (Art. 2125)
been due him by reason of the deposit. (Art. 1994) This requirement is necessary to bind third persons but not for the validity of the real
Thus, a warehouseman has the right to retain the goods deposited in his warehouse by mortgage which may be entered into in any form.
way of legal pledge until the depositor has paid him the storage cost for the goods.
Important characteristics of real mortgage
Rules applicable to legal pledge 1. Accessory - It cannot exist without a principal obligation.
The provisions on conventional pledge on the possession, care and sale of the thing as well 2. Indivisible - It creates a lien on the whole or all of the properties mortgaged, which lien
as on the termination of pledge shall be applicable to legal pledge except with respect to the sale continues until the obligation it secures has been fully paid.
of the thing as follows: 3. Inseparable - It subjects the property upon which it is imposed, whoever the possessor may
1. The thing may be sold only after demand of the amount for which the thing is retained. be, to the fulfillment of the obligation for whose security it was constituted. (Art. 2126)
2. The public auction shall take place within one month after such demand. The creditor may claim from a third person in possession of the mortgaged property, the
3. If without just grounds, the creditor does not cause the public sale to be held within such payment of the part of the credit secured by the property which said third person possesses,
period, the debtor may require the return of the thing. (Art. 2122) in the terms and with the formalities which the law establishes. (Art. 2129)
4. After the payment of debt and expenses, the remainder of the price of sale shall be delivered The third person's liability, however, is limited to the value of the property mortgaged. The
to the obligor. (Art. 2121) third person cannot be compelled to pay any deficiency after the mortgage is foreclosed
unless he expressly assumed liability for the principal obligation. (Philtrust vs. Echaus, 52 Phil
Conventional pledge and legal pledge distinguished on excess of proceeds of sale or deficiency 852)
1. Proceeds of sale exceed amount of debt Example: D obtained a loan from C amounting to P100,000.00. To secure the debt, D
In conventional pledge, the excess belongs to the creditor, unless there is a stipulation constituted a mortgage on his lot which C registered with the Register of Deeds. Before the
that the same shall be turned over to the debtor. In legal pledge, the remainder of the price due date of the loan, D sold the lot to X who knew nothing of the mortgage. If D later defaults
of sale shall be delivered to the debtor. in the payment of his loan, C can foreclose the mortgage although X was not a party thereto
2. On recovery of deficiency and even if he was not aware of the existence of the mortgage at the time he purchased the
In conventional pledge, the creditor is not entitled to recover the deficiency. Any lot. (Note: This is also an exception to the principle of relativity of contracts.)
agreement to the contrary is void. In legal pledge, the creditor is entitled to recover the 4. Real right - It creates a lien on the property mortgaged whereby the mortgagee has a right to
deficiency from the debtor. have the mortgaged property sold to satisfy his claim.
5. Real property - It is a real right over immovable property. (Art. 415, par. 10)
Special laws on pawnshops and similar establishments
Pawnshops and other establishments engaged in making loans secured by pledge shall be Kinds of real mortgage
governed by primarily by the special laws and regulations concerning them, and subsidiarity by 1. Conventional or voluntary mortgage - One which is created by the agreement of the parties.
the provisions of pledge in the Civil Code. (Art. 2123) 2. Legal mortgage - One executed pursuant to an express requirement of a provision of law.
3. Equitable mortgage - One in which, although it lacks certain formality, form or words or other
REAL MORTGAGE requisites prescribed by statute, shows the intention of the parties to charge a real property
as a security for a debt and contains nothing contrary to law. (Zulueta vs. Octaviano, L-
Requisites of real mortgage 55350, March 28, 1983, 121 SCRA 325)
1. That it be constituted to secure the fulfillment of a principal obligation.
2. That the mortgagor be the absolute owner of the thing mortgaged. Object of real mortgage
3. That the person constituting the mortgage must have the free disposal of his property, and in 1. Immovables
the absence thereof, that he be legally authorized for the purpose. (Art. 2085) The following are immovable property:
a. Land, buildings, roads and construction of all kinds adhered to the soil. Extent of real mortgage
b. Trees, plants, and growing fruits, while they are attached to the land or form an integral A contract of real mortgage shall cover the following:
part of an immovable. 1. The property mortgaged.
c. Everything attached to an immovable in a fixed manner, in such a way that it cannot be 2. Natural accessions.
separated therefrom without breaking the material or deterioration of the object. 3. Improvements.
d. Statues, reliefs, painting or other objects for use or ornamentation, placed in buildings or 4. Growing fruits.
on lands by the owner of the immovable in such a manner that it reveals the intention to 5. Rents and income not yet received when the obligation becomes due.
attach them permanently to the tenements. 6. Indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or
e. Machinery, receptacles, instruments or implements intended by the owner of the in virtue of expropriations for public use. (Art. 2127)
tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works. Stipulation prohibiting alienation and second mortgage
f. Animal houses, pigeon houses, beehives, fish ponds or breeding places of similar 1. Alienation
nature, in case their owner has placed them or preserves them with the intention to have A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.
them permanently attached to the land, and forming a permanent part of it; the animals (Art. 2130)
in these places are included. 2. Second mortgage
g. Fertilizer actually used on a piece of land. The mortgagor, being the owner of the property mortgaged, may execute a second
h. Mines, quarries, slag dumps, while the matter thereof forms part of the bed, and waters mortgage thereon, even without the consent of the mortgagee. This is an incident of
either running or stagnant. ownership.
i. Docks and structures which, though floating, are intended by their nature and object to A stipulation wherein the mortgagor must get the consent of the mortgagee before
remain at a fixed place on a river, lake or coast. subsequently mortgaging the property is valid if the property is registered under the Torrens
j. Contracts for public works, and servitudes and other real rights over immovable System. Such stipulation, however, may be disregarded by the mortgagor if the property was
property. (Art. 415) originally registered under the Spanish Mortgage Law. (Philippine Industrial Co. vs. El Hogar
Filipino, 45 Phil 336).
2. Alienable real rights in accordance with the laws, imposed on immovables. (Art. 2124)
Foreclosure of real mortgage
Form of real mortgage 1. Foreclosure, concept
1. Between the parties Foreclosure is the remedy available to the mortgagee by which he subjects the property
The real mortgage may be in any form since it is a consensual contract. The contract is mortgaged to the satisfaction of the obligation secured.
binding between the parties even if not registered in the Registry of Property.
However, since a real mortgage creates a real right, the same must be in a public 2. Grounds for foreclosure
instrument for the convenience of the parties. (See Art. 1358.) The person in whose favor the a. When the principal obligation is not paid when due.
law establishes a mortgage have no other right than to demand the execution and the b. When there is any violation of any condition, stipulation or warranty by the mortgagor.
recording of the document in which the mortgage is formalized. (Art. 2125)
3. Kinds of foreclosure
2. As regards third persons a. Judicial foreclosure - This is a foreclosure made through the filing a petition in court.
The real mortgage must be recorded in the Registry of Property. (Art. 2125) However, (Rule 68, Rules of Court)
the real mortgage is nevertheless binding against third persons who have knowledge of the 1) If the defendant fails to pay the amount due within the time directed by the court, the
same. property shall be sold.
2) The proceeds of sale shall be distributed as follows:
a) The costs of sale. 5. Redemption
b) Claim of the person foreclosing the mortgage. a. Concept
c) Claims of junior encumbrancers in the order of their priority. A transaction through which the mortgagor, or one claiming in his right, by means of
d) Balance, after all the above are paid, shall be paid to the mortgagor or his payment or the performance of the condition, reacquires or buys back the value of the title
agent. which may have passed under the mortgage, or divests the mortgaged premises of the lien
3) Deficiency judgment which the mortgage may have created. (Peralta vs. Dalipe, 46 OG133)
If the proceeds of sale are not sufficient to satisfy the claim of the creditor, the b. Kinds of redemption
court, upon motion, shall render judgement against the debtor, for such balance. 1) Equity of redemption - This refers to the right of the mortgagor to redeem the
mortgaged property after his default in the performance of his obligation but before
"Tipo" or upset price the property is sold.
The price which is set by the parties as the amount at which the property will be a) In judicial foreclosure, the mortgagor is given not less than 90 days to pay the
sold at public auction. This stipulation is null and void because it contravenes Rule 68 of mortgage debt before the property is sold. (Rule 68, Rules of Court.)
the Rules of Court which provides that the property mortgaged shall be sold to the highest b) In extra-judicial foreclosure, the mortgagor may avail himself of this right after
bidder. Accordingly, even if there is such stipulation, the sale of the property shall take his default but before the sale of the property.
place in accordance with the requirements of the law, and the property sold to the highest 2) Right of redemption - This refers to the right of the mortgagor to repurchase the
bidder. (BPI vs. Yulo, 31 Phil 472) property within a certain period after it was sold for the payment of the mortgage
debt.
b. Extra-judicial foreclosure - This is made in compliance with the provisions of Act. No. a) In judicial foreclosure, the mortgagor may redeem the property after the sale
3135 in the following cases: and before the confirmation by the court of the sale.
1) Where there is a stipulation in the mortgage contract that the mortgage may be b) In extra-judicial foreclosure, the mortgagor has one year from the date of
foreclosed extra-judicially; or registration of the sale to redeem the property.
2) Where such extra-judicial foreclosure sale is made under a special power of attorney
inserted in the contract. Real mortgage distinguished from sale with right to repurchase
1. Real mortgage is constituted as security for a principal obligation. Sale with right to
Distribution of proceeds repurchase is not a security for an obligation.
The proceeds shall be distributed in the same order as in the case of judicial 2. There is no transfer of ownership in real mortgage. In sale with right to repurchase,
foreclosure. ownership of the property is transferred upon delivery.
3. In real mortgage, there is generally no transfer of possession. In sale with right to repurchase,
Recovery of deficiency the property is generally transferred to the buyer a retro.
In case of deficiency in the foreclosure sale, the creditor may recover the same 4. A real mortgage is indivisible. In sale with right to repurchase, redemption of the property may
from the principal debtor by filing a court action. be partial.
5. Real mortgage applies only to real property. Sale with right to repurchase applies to both real
4. Effect of sale when there are two or more mortgages and personal property.
a. On senior mortgagees - Foreclosure and sale by a junior mortgagee do not affect the
rights of persons holding prior encumbrances. The purchaser acquires the property CHATTEL MORTGAGE
subject to the right of foreclosure of a senior mortgagee.
b. On junior mortgagees - Foreclosure and sale by a senior mortgagee will extinguish all Requisites of chattel mortgage
subsequent mortgages. 1. That it be constituted to secure the fulfillment of a principal obligation.
2. That the mortgagor be the absolute owner of the thing mortgaged.
3. That the person constituting the mortgage must have the free disposal of his property, and in Vehicles Law)
the absence thereof, that he be legally authorized for the purpose. (Art. 2085) b. Shares of stock - Chattel Mortgage Register in the province where the corporation has its
4. That the document in which the mortgage appears be recorded in the Chattel Mortgage principal office and in the domicile of the mortgagor, unless their domicile is the same, in
Register. (Art. 2140) which case, a single registration is sufficient. (Chua Guan vs. Samahang Magsasaka, 62
This requirement is necessary for the validity of the chattel mortgage since registration Phil 472)
thereof is part of the definition of the contract. c. Vessel - Office of the Collector of Customs at port of entry. (Arroyo vs. Yu De Sane, 54
Phil 111)
Object of chattel mortgage
Only personal property may be the object of a chattel mortgage. The following things are 2. As regards third persons
deemed personal property: An affidavit of good faith must be appended to the Deed of Chattel Mortgage and
1. Those movables susceptible of appropriation which are not included in the list of immovables recorded therewith in the Chattel Mortgage Register. (Act No. 1508)
in Art. 415.
Examples: Car, laptop computer, piano, ring. Affidavit of good faith, concept
2. Real property which by any provision of law is considered as personality. This is a sworn statement attesting to the fact that the mortgage is made for the
Under Sec. 6 of the Chattel Mortgage Law, a chattel mortgage can be executed on purpose of securing the obligation specified in the conditions thereof, and for no other
growing crops which, under Art. 415 of the Civil Code, are real property. purpose, and that the obligation is a just and valid obligation, and one not entered into
3. Forces of nature which are brought under control by science. for the purpose of fraud.
Examples: Electricity, light, gas.
4. In general, all things which can be transported from place to place without impairment of the Notes:
real property to which they are fixed. (Art. 416) 1. If the movable, instead of being recorded, is delivered to the creditor or a third person, the
Examples: Painting hanging on the wall, machinery not attached to land. contract is a pledge and not a chattel mortgage. (Art. 2140)
5. Obligations and actions which have for their objects movables or demandable sums. 2. The provisions on pledge, insofar as they, are not in conflict with the Chattel Mortgage Law
Examples: Promissory note, and the right to recover a money debt by court action. shall be applicable to Chattel Mortgage.
6. Shares of stock of agricultural, commercial and industrial entities, although they may have
real estate. (Art. 417) Foreclosure of chattel mortgage
1. Grounds for foreclosure
Form of chattel mortgage a. When the principal obligation is not paid when due.
1. Between the parties b. When there is any violation of any condition, stipulation or warranty by the mortgagor.
The mortgage must be recorded in the Chattel Mortgage Register of the province where
the mortgagor resides and also of the province where the property is located, if it is different 2. Kinds of foreclosure of chattel mortgage
from the residence of the mortgagor. a. Judicial foreclosure - This is a foreclosure made by instituting a court action, following
If the mortgagor is domiciled outside the Philippines, the mortgage must be registered in the provisions of the Chattel Mortgage Law as far as practicable.
the Chattel Mortgage Register of the province where the property is located. (Act 1508, Chattel b. Extra-judicial foreclosure - This is a foreclosure following the provisions of the Chattel
Mortgage Law.) Mortgage Law. Instituting a court action is necessary only to secure possession of the
The above registration is required for the validity of the chattel mortgage between the thing preparatory to extra-judicial foreclosure if the debtor refuses to deliver the thing.
parties. (Standard Oil vs. Jaramillo, 44 Phil 630)
3. Distribution of proceeds of foreclosure sale
Place of registration with respect to certain movables The proceeds of sale shall be distributed as follows:
a. Motor vehicles - Chattel Mortgage Register and Land Transportation Office (Motor a. The costs of sale.
b. Claim of the person foreclosing the mortgage. date of the pledge to bind third persons. A chattel mortgage must be registered and
c. Claims of persons holding subsequent mortgages in their order. accompanied by an affidavit of good faith to take effect against third persons.
d. Balance, if any, shall be paid to the mortgagor. (Act 1508, Sec. 14) 3. In pledge (conventional), the deficiency cannot be recovered even if there is a stipulation to
that effect. In chattel mortgage, the deficiency can be recovered, except in the case of
4. Effect of sale when there are two or more mortgages personal property sold in installments.
a. On senior mortgagees - Foreclosure and sale by a junior mortgagee do not affect the 4. In pledge, the excess of the proceeds of sale is retained by the pledgee unless there is a
rights of persons holding prior encumbrances. The purchaser acquires the property stipulation that it shall be given to the pledgor and in the case of legal pledge. In chattel
subject to the right of foreclosure of a senior mortgagee. The junior mortgagee may, mortgage, the excess of the proceeds of sale belongs to the mortgagor even if there is no
however, redeem the thing. (Act 1508, Sec. 13) stipulation to that effect
b. On junior mortgagees - Foreclosure and sale by a senior mortgagee will extinguish all 6. In pledge, the pledgee may appropriate the thing pledged if the same is not sold in two public
subsequent mortgages. auctions. In chattel mortgage, the mortgagee cannot appropriate the thing mortgaged.
a. I and III are true. c. I and III are false. (Sgd) Mary Montes (Sgd.) Melany Manalo
b. II and III are true. d. II and III are false.
To secure the loan, Mary Montes pledged her diamond ring, while Melany Manalo executed
a mortgage on her lot. instrument.
a. Mary Montes may demand the return of her diamond ring if she pays her share of the
debt, while Melany Manalo's share remains outstanding. 46. D contracted the services of T, a tailor, to sew D's pair of pants with D providing the cloth for
b. Melany Manalo may demand the cancellation of the mortgage on her lot if she pays her the purpose. The parties agreed that T's labor shall be P500.00. The security that T holds for
share of the debt, while Mary Montes's share remains outstanding. the payment of the labor agreed upon is in the nature of:
c. Both Mary Montes and Melany Manalo must pay the total amount of the debt before a. chattel mortgage. c. conventional pledge.
Mary Montes could demand the return of the diamond ring, and Melany Manalo the b. legal pledge. d. antichresis.
cancellation of the mortgage on her lot.
d. Patricia Palma may demand payment of the amount of P100,000.00 from either Mary 47. The requirement that the thing on which the security is constituted must be delivered by the
Montes or Melany Manalo. debtor to the creditor or a third person by common agreement refers to the characteristic of
a pledge being:
41. As a general rule, any deficiency in the foreclosure sale may be recovered in the following a. an accessory contract. c. an indivisible contract.
contracts, except in: b. a real contract. d. a consensual contract.
a. chattel mortgage. c. conventional pledge.
b. real mortgage. d. antichresis. 48. The creation of a lien on the property upon which it is imposed, whoever may be the
possessor of the property, to the fulfillment of the obligation for whose security it was
42. As a general rule, in case of excess of the proceeds of the foreclosure sale over the creditor's constituted refers to the characteristic of a real mortgage being:
claim, the excess shall belong to the creditor in: a. an accessory contract. c. an inseparable contract.
a. chattel mortgage. c. conventional pledge. b. an indivisible contract. d. a real property in itself.
b. real mortgage. d. antichresis.
49. D obtained a loan of P5,000.00 from C. The obligation is secured by a pledge of D's ring
43. Recording in the Registry of Property in the appropriate book is required for the validity of the which he delivered to C. Both the loan and the pledge were in a private instrument. While the
contract of: loan was outstanding, D sold the ring through a public instrument to X who was not aware of
a. chattel mortgage. c. conventional pledge. the pledge. Under the deed of sale, D obliged himself to deliver the ring physically to X after a
b. real mortgage. d. antichresis. week. Before X could obtain actual delivery of the ring, he learned that D had earlier pledged
the same and that C was selling the ring in a public sale because of D's default in the
44. The delivery required in pledge for its perfection and validity is: payment of his debt.
a. actual delivery. c. execution of private document. a. X is bound by the pledge made by D to C.
b. execution of public instrument. d. transfer of title of ownership. b. X is not bound by the pledge made by D to C.
c. C can sell the ring to satisfy his claim.
45. D obtained a loan from C. To secure the debt, D pledged his ring to C. Before due date, C d. X did not acquire ownership of the ring from D.
executed a private document stating that he was abandoning the pledge. In the meantime, C
remained in possession of the ring and D has yet to express his acceptance of the 50. D borrowed P10,000.00 from C the debt being payable in 6 months. To secure the debt, D
abandonment of the pledge. promised to pledge his ring within 2 weeks. Two weeks had already lapsed but D had not yet
a. The pledge of the ring is extinguished. constituted the pledge.
b. The pledge is not extinguished until C returns the ring. I. C may demand the constitution of the pledge.
c. The pledge is not extinguished unless D accepts the abandonment since it is an act of II. D loses the benefit of the period given to him to pay the debt; hence, C may demand
generosity. immediate payment of the debt.
d. The pledge is not extinguished because the abandonment should be in a public
a. Both statements are true. c. I is true; II is false. Which of the foregoing will you relay to D as correct?
b. Both statements are false. d. I is false; II is true. a. I, II, and III. c. I, III and IV
b. I, II and IV. d. II, III and IV.
51. Carmona, a creditor of Delantes, telephoned the latter to inform him that he (Carmona) was
abandoning the pledge of the ring which Delantes had constituted to secure his loan 54. D obtained a loan of P1,000,000.00 from C. To secure the debt, D executed deed of
obligation to Carmona amounting to P20,000.00. Carmona told Delantes that he would mortgage covering two of his lots, Lot A and Lot B, each of which is in the name of D in the
personally deliver the ring to Delantes within one week. certificate of title. The mortgage of Lot A was recorded within one week in the Office of the
a. Both the loan obligation and the pledge are extinguished by the abandonment. Register of Deeds, but that of Lot B could not be processed as other documents were being
b. Neither the loan obligation nor the pledge is extinguished by the abandonment. required by the Register of Deeds. In the meantime, D sold Lot A to X, and Lot B to Y. X
c. Only the loan obligation is extinguished. knew nothing on the mortgage of Lot A, but Y was aware of the mortgage of Lot B.
d. Only the pledge is extinguished. a. Both X and Y are bound by the mortgage on the lot sold to each of them.
b. Both X and Y will not be bound. In the case of X, he knew nothing of the mortgage. In the
52. D applied witfi C for a loan of P100,000.00 at 10% interest per annum promising to constitute case of Y, the mortgage was not registered.
a mortgage on his condominium unit to secure the loan within one month from the time he c. X is bound by the mortgage of Lot A. Y is not bound by the mortgage of Lot B.
received the proceeds. On the strength of D's promise to furnish a security, C granted the d. X is not bound by the mortgage of Lot A. Y is bound by the mortgage of Lot B.
loan application and gave D the option to pay the loan on or before the lapse of one year. D,
however, failed to constitute the mortgage on his condominium unit within one month as he 55. Chattel mortgage and pledge are similar in what respect?
had promised. A list containing the following possible remedies were presented to you by C a. Right of the creditor to recover the deficiency if the proceeds of the foreclosure sale are
for evaluation: lower than the obligation.
I. Demand immediate payment of the debt from D. b. Object of the contract.
II. Demand that D constitute the mortgage as he had promised. c. Right of the person constituting the security to get excess of the proceeds of the
III. Foreclose the mortgage on the condominium to satisfy the claim. foreclosure sale over the amount of the obligation.
d. Formality required to bind third persons.
Which of the foregoing possible remedies may you validly recommend to C?
a. I or II. c. I or III. 56. D obtained a loan of P5,000.00 from C. The loan obligation, which is due at the end of six (6)
b. II or III. d. I, II or III. months, is secured by a pledge of D's ring which D delivered to C. While D executed a
promissory note for the loan of P5,000.00, no written instrument was executed by the parties
53. D, your client, is applying for a loan of P200,000.00 with C. He is proposing to C that he will for the pledge of the ring.
secure the loan with a chattel mortgage on his car. He made a list containing the items below
and asks you to check whether they are correct: You are presented the following statements for evaluation:
I. D will no longer be liable for deficiency to C in case he defaults in the payment of the I. The pledge is not binding between the parties.
loan and the car is sold at the foreclosure sale for less than P200,000.00. II. The pledge is not binding to third persons.
II. D and C must record the deed of chattel mortgage in the Chattel Mortgage Register for
the validity of the chattel mortgage. In your evaluation of the foregoing facts and statements:
III. D must execute an affidavit of good faith to be appended to the deed of chattel mortgage a. Both statements are true. c. Only Statement 1 is true.
to bind third persons. b. Both statements are false. d. Only Statement II is true.
IV. D will be entitled to the excess of the proceeds of the foreclosure sale over the loan
obligation in case he defaults in the payment of the loan. 57. D obtained a loan of P300,000.00 from C payable in 12 months. The debt bears interest at
1% per month and is secured by a chattel mortgage executed by D on his car and a real
mortgage executed by T, a friend of D, on T's lot. The contract of loan, deed of chattel Property.
mortgage, and deed of real mortgage were all in a public document but none is registered.
a. The loan, chattel mortgage and real mortgage are valid. 62. D obtained two loans: one from ABC Bank amounting to P400,000.00 which bears interest at
b. Only the chattel mortgage and real mortgage are valid. 10% per annum and for which he executed a chattel mortgage on his car; and the other from
c. Only the loan and chattel mortgage are valid. DEF Bank amounting to P600,000.00 at 11% interest per annum and for which he executed a
d. Only the loan and real mortgage are valid. real mortgage on his house and lot. The documents evidencing both the chattel mortgage
and the real mortgage were acknowledged before a notary public but were not registered in
58. Pledge is extinguished by any of the following means, except: the appropriate books in the Register of Deeds. In case of default in the payment of his
a. Return by the pledgor of the thing pledged. obligation on the part of D:
b. Written abandonment of the pledge by the pledgee who remains in possession of the a. Both ABC Bank and DEF Bank may foreclose their corresponding security.
thing pledged. b. Neither ABC Bank nor DEF Bank may foreclose its corresponding security.
c. Sale of the thing pledged for less than the amount of the debt. c. Only ABC Bank may foreclose its security, which is the chattel mortgage.
d. Appropriation of the thing pledged if not sold at one public auction. d. Only DEF Bank may foreclose its security, which is the real mortgage.
59. A, B and C are debtors of X for P30,000.00. The debt is secured by a pledge of the ring of A, 63. Refer to No. 62. Assuming that both ABC Bank and DEF Bank may validly foreclose their
the bracelet of B, and the wristwatch of C. These statements are presented to you based on security, and the foreclosure sale resulted in a deficiency:
the foregoing facts for evaluation: a. Both may recover the deficiency.
I. X may demand payment of the amount of P30,000.00 from either A, B or C. b. Neither one may recover the deficiency.
II. Payment by A of his share of the debt entitles him to demand the return of the ring c. Only ABC Bank may recover the deficiency.
from X. d. Only DEF Bank may recover the deficiency.
In your evaluation of the foregoing facts and statements: 64. D pledged his ring to secure his debt to C amounting to P20,000.00 payable after 30 days.
a. Both statements are true. c. Only I is true. On due date, D defaulted. At public auction, the ring was sold only for P18,000.00.
b. Both statements are false. d. Only II is true. a. Both the debt of P20,000.00 and the pledge are extinguished.
b. Neither the debt of P20,000.00 nor the pledge is extinguished.
60. A contract of antichresis to be valid: c. The pledge is extinguished. The debt will be extinguished when C has recovered the
a. must be in writing. deficit of P2,000.00 from D.
b. must be in a public instrument. d. The debt is extinguished. However, the pledge will subsist.
c. must be recorded in the Registry of Property.
d. may be in any form. 65. Pledge, real mortgage, chattel mortgage, and antichresis are similar to one another with
respect to:
61. Which of the following is not a common requisite of pledge, real mortgage and chattel a. The kind of object of the contract.
mortgage? b. Their binding effect on third persons.
a. That it be constituted to secure the fulfillment of a principal obligation. c. Their being indivisible.
b. That the person constituting the security must be the absolute owner of the property on d. The form to make them binding between the parties.
which the security is being constituted.
c. That the person constituting the security must have the free disposal of the property, and 66. D borrowed P50.000.00 from C. The debt, which is due after 3 months, is secured by a
in the absence thereof, that he be legally authorized for the purpose. pledge of a painting by a national artist and is worth about 5 times more than the amount of
d. That the security agreement must be recorded in the appropriate book in the Registry of the debt. D and C had a stipulation that should D default in his payment, C automatically
becomes the owner of the painting. D defaulted. b. Ownership of the pendant was acquired by C by reason of dacion en pago.
a. C became the owner of the painting upon the default of D pursuant to their agreement. c. Ownership of the pendant was not acquired by C because the agreement is void.
b. C must sell the painting in a public sale, and if it is not sold at the first public auction, C d. Ownership of the pendant was not acquired by C because the value thereof should be of
already acquires ownership thereof. the same amount as the total amount due.
c. C did not become the owner of the painting upon the default of D.
d. Under no instance may C become the owner of the painting. He must sell it at public 71. For binding effect between the parties:
auction not only once but several times until it is sold. I. A chattel mortgage must be recorded in the Chattel Mortgage Register.
II. A real mortgage must be recorded in the Registry of Property.
67. Refer to No. 66. The stipulation between D and C that C automatically becomes the owner of
the painting upon D's default is known as: The foregoing is true with respect to:
a. Constitutum possessorium. c. Expromision. a. Both I and II. c. I only.
b. Pactum commissorium. d. Delegacion. b. Neither I nor II. d. II only.
68. D obtained a loan of P100,000.00 from C. To secure the debt, D pledged his goods which are 72. The following are the indirect causes of extinguishment of pledge:
currently stored in the warehouse of W. The stipulations of the parties include the following: I. Written abandonment of the thing pledged.
I. The goods will remain in the warehouse of W. II. Appropriation of the thing pledged if not sold at two public auctions.
II. C will automatically become the owner of the goods if D defaults in the payment of the III. Return of the thing pledged.
loan. IV Sale of the thing pledged.
The stipulation/s binding between D and C is/are: Which of the above modes of extinguishment will extinguish not only the pledge but also the
a. I only. c. Both I and II. principal obligation it secures?
b. II only. d. Neither I nor II. a. I and III. c. I and II.
b. II and IV. d. Ill and IV
69. D borrowed P30,000.00 from C pledging as security his ring, necklace and bracelet with the
ring as the most valuable, and the bracelet as the least valuable. On due date, D paid the 73. When the thing pledged is in danger of deterioration or impairment without the fault of the
amount of P20,000.00. Accordingly: pledgee, the pledgor has a right to demand the return the thing pledged by offering another
a. D can demand the return of the ring and the necklace, the two most valuable of the three thing of the same kind and quality. At the same time, the pledgee has a right to cause the
objects of pledge. sale of the thing pledged. Who between the pledgor and pledgee is given preferential right?
b. D can demand the return of the necklace and the bracelet, the two least valuable of the a. Pledgor
three of the objects of pledge. b. Pledgee
c. D can demand the return of any of the two objects of pledge at his choice. c. Either one whoever asserts first the right.
d. D cannot demand the return of any of the things pledged. d. Neither, because the preferential exercise of the right must be stipulated.
70. D obtained a 12% interest-bearing loan of P50,000.00 from C, and to secure the debt, D 74. The creditor may automatically appropriate for himself the thing on which the security was
pledged his diamond pendant. On due date, D wrote a letter to C proposing to relinquish the constituted upon the default of the debtor in:
ownership of the diamond pendant because he did not have enough money to pay the loan a. Pledge. c. Anthichresis
and the interest due although the total amount due was less than the value of the pendant. C b. Mortgage. d. Automatic appropriation is not allowed
accepted the proposal. in any case.
a. Ownership of the pendant was acquired by C by reason of pactum commissorium.
75. D borrowed P5,000.00 from C. To secure the debt, D pledged 50 grams of "shabu”. On due b. C can collect from D because the mortgagor need not be the owner of the property.
date, demanded payment but D refused to pay by raising the defense that his debt is void. c. C can collect from D because although the mortgage is void, the loan obligation can
May C collect from D? stand independently from it.
a. No, because the loan obligation and the pledge are contrary to law. d. C cannot collect from D because the latter was not authorized by any power of attorney
b. Yes, but if D cannot pay, C may go after the pledge to satisfy his claim. to mortgage the lot.
c. No, because the nullity of the pledge carried with it the nullity of the loan obligation.
d. Yes, but if D cannot pay, C may have to resort to other remedies to satisfy his claim. 80. A real mortgage:
a. confers ownership of the mortgaged property in the mortgagee upon its constitution.
76. A written instrument indicates that D received P20,000.00 from C. Later, the parties executed b. creates encumbrance on real property.
a written instrument indicating the delivery by D of his laptop computer to C. In case of doubt, c. confers ownership of the mortgaged property in the mortgagee if the principal obligation
what contract was entered into between D and C as regards the laptop computer? it secures is not paid on due date.
a. Pledge c. Sale d. confers ownership of the mortgaged property in the mortgagee upon default of the debtor
b. Dacion en pago d. None, the contract is void as to the if the parties stipulated about it.
delivery of the computer.
81. These statements are presented to you:
77. D obtained a loan of P100,000.00, secured by a pledge of diamond ring, from C. The parties I. In a real mortgage, the property on which it was constituted is not required to be
had a stipulation that should D fail to pay the debt on due date, C may purchase the diamond delivered to the creditor.
ring at the current purchase price. Is the stipulation valid? II. Placing a real property mortgaged in the possession of the creditor is an authorization to
a. No, such stipulation is in the nature of pactum commissorium. the creditor to make himself the owner if the principal obligation is not paid when due.
b. Yes, the purchase of the ring by C at the current price does not come within the
prohibition on pactum commissorium. In your evaluation of the foregoing statements:
c. No, but C can still purchase the ring if it is not sold at two public auctions. a. Only Statement I is true. c. Both statements are true.
d. Yes, but C can only purchase the ring if it is not sold at two public auctions. b. Only Statement II is true. d. Both statements are false.
78. D borrowed P50,000.00 from C. The parties agreed in a private instrument that D's goods 82. These statements are presented to you:
which are deposited in the warehouse of W would secure the loan by way of pledge. C never I. A mortgage on real property is a real property by itself.
took actual possession of the goods, nor did the parties agree that the goods would remain II. Movables may be the object of real mortgage by stipulation of the parties.
with W. Was a pledge constituted on the goods?
a. Yes, because mere agreement that the goods would secure the debt is sufficient. In your evaluation of the foregoing statements:
b. No, the goods must be delivered to C, or there must be a common agreement that the a. Both statements are true. c. Statement I is true; Statement II is false.
goods would remain in the possession of W. b. Both statements are false. d. Statement I is false; Statement II is true.
c. Yes, delivery of the goods to the creditor is not required if they are in the control and
possession of a third person. 83. A sale with right to repurchase differs from real mortgage in that in sale with right to
d. No, the pledge should be in a public instrument for the pledge to be constituted. repurchase:
a. there is no transfer of ownership of the property.
79. D obtained a 12-month loan of P100,000.00 from C. D constituted a mortgage on a certain lot b. a security is constituted on the property.
which he knew belonged to X. On due date: c. the contract is indivisible.
a. C cannot collect from D because the obligation is rendered void, D, the mortgagor, not d. there is generally a transfer of possession of property.
being the owner of the mortgaged lot.
84. D owed C P10,000.00. The debt is secured by a pledge of D's diamond ring. On due date, C 90. A sworn statement attesting to the fact that the chattel mortgage is made for the purpose of
phoned D informing the latter that he was condoning D's debt. D accepted C's condonation of securing the obligation specified in the conditions thereof, and for no other purpose, and that
the debt in the same telephone conversation. The condonation of D's debt extinguished: the obligation is a just and valid obligation, and one not entered into for the purpose of fraud.
a. both the principal obligation and the pledge. a. Affidavit of good moral character c. Affidavit of good faith
b. the principal obligation only. b. Affidavit of merit d. Affidavit of trust
c. the pledge only.
d. neither the principal obligation nor the pledge. 91. The sworn statement referred to in the preceding number must be appended to the deed of
chattel mortgage in order to bind:
85. The written* abandonment of the pledge produces which of the following effects? a. the mortgagor. c. principal debtor.
a. The principal obligation is extinguished. b. the mortgagee. d. third persons.
b. The pledge remains unless the thing pledged is returned.
c. The pledge remains unless the debtor/pledgor has accepted the abandonment in writing. 92. The price stipulated by the parties to a mortgage contract below which the property shall not
d. The pledgee becomes a depositary until he gives back the possession of the thing be sold at public auction.
pledged to the debtor/pledgor. a. Market price c. "Tipo" or upset price.
b. Current price d. Selling price
86. One of the following is not a characteristic of real mortgage.
a. Accessory contract c. Inseparable contract 93. The stipulation on the price mentioned in the preceding number is:
b. Real contract d. Indivisible contract a. void between the parties and as regards third persons.
b. valid between the parties but void as to third persons.
c. valid between the parties and as regards third persons.
87. A real mortgage is binding between the parties: d. void between the parties but valid as regards third persons.
a. although it was entered into orally.
b. only if it was entered into in writing, whether public or private. 94. Davila obtained a loan of P100,000.00 from Capacio. The contract between the parties
c. only if it was entered into in a public instrument. provided, among other stipulations, that Davila would constitute a mortgage on his lot located
d. only if it was recorded in the Registry of Property. in Angono (Lot A) to secure the amount of P40,000.00, and another mortgage on his lot
located in Binangonan (Lot B) to secure the amount of P60,000.00,. and that the loan shall be
88. In general, for a chattel mortgage to be binding between the parties, the same must be paid in two installments: P40,000.00 due on September 30, and P60,000.00 due on October
recorded in the Chattel Mortgage of the province where the: 31. Davila defaulted in the payment of the first installment by reason of insolvency. Upon
a. mortgagor resides. such default, Capacio may foreclose the mortgage constituted on:
b. mortgaged property is located. a. Lot A only.
c. mortgagor resides and where the property is located. b. Lot B only.
d. (c) and where the mortgagee resides. c. Both Lot A and Lot B.
d. Neither Lot A and Lot B because Davila has still up to October 31 to pay the whole
89. For binding effect between third persons, the chattel mortgage of shares of stock of a amount.
domestic corporation must be recorded in the Chattel Mortgage of the province where the:
a. mortgagor resides. 95. Refer to the preceding number. If Davila did not become insolvent and instead paid the two
b. principal office of the corporation is located. installments on their respective due dates:
c. mortgagor resides and where the principal office of the corporation is located. a. Davila may ask for the cancellation of the mortgage constituted on Lot A upon payment
d. (c) and where the stock certificate covering the shares is located. of the first installment.
b. Davila may ask for the cancellation of the mortgage constituted on Lot B upon payment III. Tamondong, if there was a stipulation on the recovery of the deficiency.
of the second installment. IV Tamondong, even if there was no stipulation on the recovery of the deficiency.
c. Both (a) and (b) are correct.
d. Davila may ask for the cancellation of the mortgage constituted on both lots only upon From whom may Colmenares recover the deficiency of P5,000.00?
payment of the second installment because the indivisibility of the mortgage remained a. I and III. c. I and IV.
notwithstanding the stipulation between the parties. b. II and IV. d. II and III.
96. The following stipulations between the pledgor/mortgagor and the pledgee/mortgagee are 100. DiCaprio obtained a loan of P50,000.00 from Carillo with Tapales pledging his Nikon camera
presented to you: to secure the debt. DiCaprio failed to pay the debt on due date. Accordingly, Carillo caused
I. That the pledgee/mortgagee may purchase the thing pledged/mortgaged at its current the sale of the Nikon camera at public auction However, the net proceeds of the sale
price when the debt is not paid when due. amounted to P44,000.00 only or a deficiency of P6,000.00. From whom may Carillo recover
II. That the pledgee/mortgagee may bid at the public auction of the thing the deficiency?
pledged/mortgaged. a. DiCaprio and Tapales if there was a stipulation on the recovery of the deficiency.
b. DiCaprio and Tapales, even if there was no stipulation on the recovery of the
Which of the foregoing stipulations is valid? deficiency.
a. Both I and II. c. II only. c. DiCaprio, even if there was no stipulation to recover the deficiency from him, and
b. I only. d. Neither I nor II, because they are in the Tapales, if there was a stipulation to recover the deficiency from him.
nature of pactum commissorium. d. From neither DiCaprio nor Tapales.
97. It refers to the procedure adopted by the mortgagee to terminate the rights of the mortgagor TEST II - MATCHING TYPE. Indicate your answers by writing the letter representing the statement
on the property mortgaged and includes the sale of the property. or phrase that best describes, defines or explains the numbered items.
a. Redemption c. Foreclosure
b. Repossession d. Repurchase Terms
1. Pledge 11. Indivisibility
98. The following objects are presented to you: 2. Real estate mortgage 12. Antichresis
I. Growing crops which are considered real property under the Civil Code. 3. Chattel mortgage 13. Affidavit of good faith
II. Shares of a stock of a domestic corporation engaged in the real estate business. 4. Pactum commissorium 14. Pledgor
5. Foreclosure 15. Mortgagor
Which of the foregoing may be the object of a chattel mortgage? 6. Legal pledge 16. Equitable mortgage
a. I only. c. Both I and II. 7. Conventional pledge 17. Upset price
b. II only. d. Neither I nor II. 8. Equity of redemption 18. Free disposal
9. Right of redemption 19. Pledgee
99. Depante obtained a loan of P100,000.00 from Colmenares. To secure the debt, Tamondong, 10. Inseparability 20. Mortgagee
a friend of Depante, mortgaged his lot. Depante defaulted in the payment of his loan.
Accordingly, Colmenares foreclosed the mortgage. However, only the net amount of Statements
P95,000.00 was realized at the foreclosure sale or a deficiency of P5,000.00. The following A. The party who delivers a movable property to another to secure his debt or that of another
are instances on the possible liability of Depante and Tamondong on the deficiency. person.
I. Depante, if there was a stipulation on the recovery of the deficiency. B. The property being given in pledge or mortgage must not be subject to any claims or
II. Depante, even if there was no stipulation on the recovery of the deficiency. encumbrances.
C. The price stipulated by the parties in a mortgage below which the property shall not be sold in TEST III - TRUE OR FALSE. Write the word "TRUE" if the statement is true, and the word 'FALSE"
the event of foreclosure. if the statement is false.
D. The party who receives a movable property from another to secure the latter's debt or that of
another. 1. A third person may pledge his property to secure another person's debt.
E. The object of a chattel mortgage. 2. The mortgagee of a real estate may appropriate for himself the said property if it is not sold at
F. The right of the mortgagor to repurchase within a certain period the property that was two public auctions to satisfy the debtor's obligation.
mortgaged after it was sold for the payment of the mortgage debt. 3. The thing pledged or mortgaged cannot be sold or alienated by the creditor before the due
G. The character of a contract of mortgage whereby the property upon which the mortgage is date of the obligation it secures unless the debtor fails to fulfill certain conditions.
imposed is subjected to the fulfillment of the obligation for whose security it was constituted, 4. A stipulation in a pledge or mortgage whereby the creditor automatically becomes the owner
whoever the possessor of the property may be. of the property pledged or mortgaged upon default of the debtor is void.
H. One lacking the formalities of a mortgage but nevertheless shows the intention of the parties 5. A mortgagee may appropriate the movable property mortgaged if the same is not sold at two
that a certain property shall secure an obligation. public auctions in case of foreclosure.
I. A pledge created by the agreement of the parties. 6. A third person who mortgages his property to secure another person's debt shall be liable as
J. A sworn statement attesting to, the fact that the mortgage is made for the purpose of securing a rule for the deficiency in case the proceeds of the foreclosure sale are lower than the
the obligation specified in the conditions thereof, and for no other purpose, and that the amount of the debtor's obligation.
obligation is a just and valid obligation, and one not entered into for the purpose of fraud. 7. A pledge or mortgage is divisible if there are several debtors who are jointly bound.
K. A mortgage constituted upon an immovable to secure an obligation. 8. A promise to constitute a pledge or mortgage which is accepted creates a pledge or
L. The stipulation in a contract of pledge or mortgage whereby the creditor automatically mortgage between the promissor and the promissee.
becomes the owner of the property pledged or mortgaged upon default of the debtor, which 9. The thing pledged may be delivered to a third person by the agreement of the debtor and the
stipulation is void. creditor.
M. The remedy given to the mortgagee by which he subjects the mortgaged property to the 10. Incorporeal rights such as shares of stock may be the object of pledge.
satisfaction of the obligation through the sale of the mortgaged property at public auction and 11. A pledge to be binding against third persons must be registered in the Registry of Property.
the application of the proceeds of the sale to the payment of his claim. 12. Pledge shall extend to the fruits of the thing pledged unless there is a contrary stipulation.
N. A mortgage constituted upon a movable property to secure an obligation. 13. The debtor/pledgor may alienate the thing pledged without the pledgee's consent.
0. The character of pledge or mortgage whereby a lien is created on the property pledged or 14. If the thing given in pledge is in danger of destruction or impairment without the fault of the
mortgaged, which lien continues until the obligation it secures has been fully paid. pledgee, the pledgee may sell the property in a public sale with the proceeds becoming the
P. The party who constitutes a security upon a movable or immovable property but without new security in place of the thing originally pledged.
delivering the property. 15. The pledgee may use the thing pledge even without obtaining the consent of the pledgor if
Q. Movable property is delivered by the debtor to the creditor or a third person by common the use of the thing is necessary for its preservation.
agreement to secure a principal obligation. 16. A written renunciation by the pledgee of the pledge extinguishes the pledge although the
R. The right of the mortgagor to redeem the mortgaged property after his default in the thing remains in the possession of the pledgee.
performance of his obligation but before the property is sold. 17. In conventional pledge, if the thing pledged is sold at public auction upon the debtor's default,
S. A pledge created by operation of law. the debtor's obligation is extinguished whether the proceeds of sale are below or above the
T. A contract whereby the fruits an immovable belonging to the debtor or a third person are to amount of the obligation.
be applied to the interest of, and thereafter to the principal obligation. 18. In legal pledge, the pledgee may recover the deficiency if the proceeds of sale are lower than
U. The party in whose favor a security is constituted upon a movable or immovable property but the amount of the debtor's obligation.
without the delivery of the property to him. 19. A mortgage of immovable property is also a real property.
V. None of the foregoing. 20. A real mortgage is binding between the parties although the same was entered into orally.
21. Third persons who have no knowledge of the existence of a real mortgage are bound by such
mortgage if the same is recorded in the Registry of Property. 16. C 36. C 56. D 76. A 96. A
22. A real mortgage extends to the growing fruits and improvements on the property mortgaged. 17. D 37. C 57. D 77. B 97. C
23. A stipulation forbidding the mortgagor of an immovable to alienate the same is valid. 18. B 38. D 58. D 78. B 98. C
24. A chattel mortgage is valid between the parties although the same is not recorded in the 19. B 39. D 59. B 79. C 99. D
Chattel Mortgage Register. 20. D 40. C 60. A 80. B 100. D
25. An affidavit of good faith must be appended to the deed of chattel mortgage and recorded in
the Chattel Mortgage Register for the chattel mortgage to bind third persons. TEST II -MATCHING TYPE
26. As a rule, the mortgagee in a chattel mortgage may recover the deficiency from the debtor in 1. Q 6. S 11. O 16. H
case the proceeds of the foreclosure sale are lower than the amount of the debtor's 2. K 7. I 12. T 17. C
obligation. 3. N 8. R 13. J 18. B
27. The amount of the principal and the interest must be in writing for a contract of antichresis to 4. L 9. F 14. A 19. D
be valid. 5. M 10. G 15. P 20. U
28. The antichretic creditor may exempt himself from the payment of the taxes and charges upon
the immovable and the expenses for its preservation and repair by compelling the debtor to TEST III-TRUE OR FALSE
enter upon the enjoyment of the property. 1. TRUE 11. FALSE 21. TRUE
29. If the debtor fails to pay his debt in a contract of antichresis, the creditor acquires .ownership 2. FALSE 12. TRUE 22. TRUE
of the immovable. 3. TRUE 13. FALSE 23. FALSE
30. In antichresis, the actual market value of the fruits at the time they are applied to the interest 4. TRUE 14. TRUE 24. FALSE
and principal obligation shall be the measure of such application. 5. FALSE 15. TRUE 25. TRUE
6. FALSE 16. TRUE 26. TRUE
ANSWERS TO DIAGNOSTIC EXERCISES 7. FALSE 17. TRUE 27. TRUE
PLEDGE, MORTGAGE AND ANTICHRESIS 8. FALSE 18. TRUE 28. TRUE
9. TRUE 19. TRUE 29. FALSE
TEST I - MULTIPLE CHOICE 10. TRUE 20. TRUE 30. TRUE
1. D 21. A 41. C 61. D 81. A
2. B 22. A 42. C 62. D 82. C
3. A 23. B 43. A 63. A 83. D
4. D 24. C 44. A 64. A 84. D
5. B 25. A 45. A 65. C 85. D
6. B 26. D 46. B 66. C 86. B
7. C 27. C 47. B 67. B 87. A
8. D 28. B 48. C 68. A 88. C
9. C 29. B 49. B 69. D 89. C
10. D 30. B 50. A 70. B 90. C
11. D 31. A 51. B 71. C 91. D
12. B 32. D 52. A 72. B 92. C
13. C 33. D 53. D 73. B 93. A
14. B 34. B 54. A 74. D 94. C
15. C 35. D 55. B 75. D 95. C