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-
covers Articles 0 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 If a person binds It is a contract by By a chattel A real estate By the contract of
person, called the himself virtue of which mortgage, personal mortgage is a antichresis the
guarantor, binds solidarily with the debtor property is recorded contract creditor acquires
himself to the the principal delivers to the in the Chattel whereby the the right to receive
creditor to fulfill the debtor, the creditor or to a Mortgage Register as debtor secures the fruits of an
obligation of the provisions of third person a a security for the to the creditor immovable of his
principal debtor in Section 4, movable performance of an the fulfillment debtor, with the
case the latter should Chapter 3, or a document obligation. If the of a principal obligation to app
fail to do so. Art. Title 1 of this involving movable, instead of obligation, apply them to the
2047 (1) Book shall be incorporeal rights being recorded, is specially payment of the
observed. In for the purpose of delivered to the subjecting to interest, if
such case the securing the creditor or a third such security owing, and
contract is called fulfillment of a person, immovable thereafter to the
 a suretyship. principal the contract is a property principal of his
(Art. 2047 (2)) obligation with pledge and not a or real rights credit. (Art. 2132.)
the understanding chattel mortgage. over
that when the (Art. 2140) immovable
obligation is property in
fulfilled, the case the
thing delivered principal
shall be returned obligation is
with all its fruits not complied
and accessions. with at the
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 debt, default or principal principal principal
miscarriage of miscarriage of obligation. obligation obligation
another 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 Incorporeal
immovable property: guaranty 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 1. It is an accessory Mortgage is a 1. Accessory – It
CHARACTERISTICS dependent for its Accessory BUT is 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,
effect only when the collateral to the independent contract because it however,
principal debtor fails in obligation
his contracted by the
existence. requires registration believes that it is
obligation. principal. BUT, his 3. Unilateral, in the Chattel an independent
3. Unilateral: liability to the because it creates Mortgage contract.
a. It gives rise to creditor is direct,
obligations on the part of primary, and an obligation Register for its 2. Formal
the guarantor in relation absolute. solely on the part validity (but only Contract – It must
to the creditor and 2. Liability is
not vice-versa. (Although limited by the terms
of the creditor to against third be in specified
after its fulfillment, the of the contract: The return the persons) form to be valid
principal debtor should extent of a surety’s thing pledged 3. It is a unilateral (in writing).
indemnify liability is upon fulfillment contract because it 3. A third person,
the guarantor, but this determined only by of the principal produces only who is not a party
obligation is only the terms of the
incidental) contract and cannot
obligation. obligations on the to the principal
b. It may be entered into be extended by 4. Subsidiary, part of contract, may
even without the implication. because the the creditor to free offer his
intervention of the 3. Liability arises obligation of the the thing from the immovable
principal debtor. only if principal creditor does not encumbrance on under the contract
4. Distinct Person: It debtor is held liable:
requires that the person If the principal
arise until fulfillment of the of antichresis to
of the guarantor must be debtor and the fulfillment of the obligation. secure the debt of
distinct from the surety are held principal another. (2085)
person of the principal liable, their liability obligation. 4. The contract of
debtor (you cannot to pay the creditor antichresis is
guaranty your own debt). would be solidary.
indivisible. (2089)
However, in a real But, the surety does
guaranty, a person may not incur liability 5. The
guarantee his own unless and until the indivisibility of
obligation with his own principal debtor is the antichresis is
properties. held liable. not affected by the
4. Surety is not
fact that the
GENERAL RULE: entitled to
Guaranty is gratuitous. exhaustion: A surety debtors are not
EXCEPTION: Guaranty is not entitled to the solidarily liable.
is onerous only if it is exhaustion of the (2090)
stipulated guarantee is properties of the 6. The contract of
given. principal debtor antichresis may
since the surety
assumes a solidary secure all kinds of
liability for the obligations – pure
fulfillment of the or conditional.
principal obligation. (2091)
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 CONSENSUAL REAL Delivery is not
must be delivery CONTRACT required for the
of 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

be enforceable. It is writing writing specific form is writing, a writing, otherwise
govern by the Statute required. specific form is it 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 But interest shall be
the oral mortgage specified in writing;
is not binding otherwise, the contract
against third of antichresis shall be
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 Creditor must be
not be the owner. owner of the thing thing mortgaged, otherwise the mortgage the owner
pledge, otherwise is void.
the pledge is void.
VALIDITY The contract of Not valid against In Chattel Mortgage, In Real The contract is
guaranty is valid third persons unless not valid against third Mortgage, not valid only
only between the a description of the person unless valid against between the
contracting parties. thing pledged and registered in the third persons if parties.
the date of the Chattel Mortgage not registered.
pledge appear in a Register.
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 1) To demand the 1) To pay the
return in case of
THE PARTIES cannot be an reasonable
taxes and
compelled to obligation; grounds to fear In Real Mortgage, charges
pay the he is the destruction or Mortgagor’s Right: upon the
creditor principal impairment of 1) To alienate the thing mortgaged estate
unless the obligor the thing property but the mortgage shall unless
without the
latter has pledgee’s fault,
remain attached to the property. there is a
exhausted all Surety- a subject to the A stipulation forbidding the owner from contrary
the property person who duty of alienating the immovable mortgage shall stipulation.
of the debtor engages replacement. be void being contrary to public policy 2) To pay
and has himself to be 2) To bid and be inasmuch as the transmission of property expenses
preferred at the
resorted to all answerable public auction.
should not be unduly impede. for
the legal to a third 3) To alienate the Mortgagee’s Right: necessary
remedies person for thing pledged 1) To claim from third a person in repairs.
against the debt, default, provided the possession of the mortgaged Debtor:
debtor. miscarriage pledgee consent property the payment of the part To pay what he
to the sale.
Creditor: of another. of the credit secured by which owes the creditor
4) To ask that the
 1) Exhaust all thing pledged said third person possesses. in order to
the property Obligee- to be deposited in It is necessary that prior demand for reacquire the
one of the
of the debtor whom the following
payment must have been made on the enjoyment of the
unless the obligation is cases: debtor and the latter failed to pat. immovable.
guarantor is made. a) F the creditor
not entitled to uses the thing
such benefit without
authority.
under art. b) He misuses the
2059. thing.
2) Resort to all c) The thing is
the legal endangered of
remedies being lost or
impaired
against the because of
debtor. negligence or
3) Prove that the willful act of
debtor is still the pledgee.
unable to pay.
Pledgor’s Obligations:
Debtor:
1) To advise the
Payment of his 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 2) Petition for
be made from the
2) Right of the sale of
date of demand
subrogation the
otherwise; the mortgages
Other remedies: debtor may require
1) Obtain release under Rule
the return of the 68 of the
from the
guaranty. thing. Rules of
Demand a security Court.
3) Judicial
that shall protect him
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 cover
REQUISITES cannot exist the thing pledged 1) It can cover only Mortgage, only the
without a must be personal or 1) It can fruits of an
valid transferred to the movable cover immovable
creditor or a third property in only property
obligation.
person by general; immova 2) Delivery of
2) May also be agreement the
given as security for however, the ble
2) Subject
future debts. parties may treat propert immovable
matter:
as personal y and is necessary
movable and
incorporeal rights property that alienabl for the
evidenced by which by its e real creditor to
documents of the nature would be rights receive the
title and the real property. impose fruits and
instruments 2) Registration of d upon not that the
proving the right the mortgage immova contract
pledged shall be with the Chattel ble. shall be
delivered to the Mortgage 2) It must biding.
creditor and if Register where appear 3) Amount of
negotiable must the mortgagor in a the
be endorsed. resides; if public principal
The description of property is instrum and interest
the thing pledged located in a ent. must be
and the date of must different Registration in specified in
appear in a public province, the registry of writing.
instrument to bind registration in property is Express agreement
third persons but not both provinces is necessary to that debtor will
for the validity of required. bind third give possession of
the contract. 3) Description of persons but not the property to
the property as for the validity creditor and that
would enable the of the contract. the latter will
parties or other apply the fruits to
persons to the interest if any
identify the same ten to the principal
after reasonable of his credit.
 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 1) For the same 1) Foreclosure of the The debtor shall
thing
OF A CONTRACT of one of the causes as all mortgaged. have the right to
guarantors, other the extinguishment
Judicial – ordinary action for foreclosure
without the obligations. under Rule 68 of the Rules of Court of the pledge or
consent of the 2) Return of the mortgage as the
other, benefits all thing pledged Extra-judicial – when mortgagee is given portion of the debt
to the extent of by the a special power of attorney to sell the for which each thing
the share of all pledgee to the mortgaged property by public auction is especially
the guarantor to pledgor. under Act No. 3135 answerable is
whom it has been 3) Statement in satisfied.
granted. writing by the
2) If the creditor pledge that he
voluntarily renounces or
accepts abandons the
immovable or pledge.
4) Payment of
other properties
the debt.
in payment of the
5) Sale of the
debt, even if he
thing pledged
should afterwards
at public
lose the same
auction.
trough eviction or Appropriation under
conveyance of Art. 2112.
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
guarantor.