REAL ESTATE MORTGAGE - Parties

a) Contract whereby the debtor secures to the creditor the fulfillment of a - Purpose
principal obligation specially subjecting to such security immovable - Signed by the Parties
property or real rights over immovable property in case the principal (2)
Notarization
obligation is not complied with at time stipulated - Anywhere
(3)
Pay Documentary Stamp Tax
REQUISITES : ESSENTIAL TO PLEDGE AND MORTGAGE - Where property is ; within 5 days of succeeding moth ; percentage on
[ART 2086] value of property
(1) Secure fulfillment of Principal Obligation (4) Pay Real Property Tax
(2) Pledgor/Mortgagor : Absolute Owner of thing Pledged or Mortgaged - Treasurer’s Office
(3) Persons Constituting it : Free disposal of property & in absence –legally (5) Registry of Deeds
authorized for that purpose - Mortgage document
ADDITIONALS - Owners Duplicate and Original Certificate of Title
(4) When principal obligation becomes due, property mortgaged may be - RPT
alienated for payment to the creditor “ANY AND ALL FUTURE INDEBTEDNESS”
(5) To prejudice third persons, mortgage must be recorded in the Registry of - Not registered --not binding to 3P
Property - New document for every release of funds /just make a credit line
arrangement
PARTIES (1) Creditor/ Mortgagee
(2) Debtor/Mortgagor MORTGAGE VOID
OBJECT Real Property/ Alienable rights imposed upon - But principal obligation remains binding
immovable property
CAUSE Same as Principal Obligation DISPOSITION/ALIENATION
FORM [Art 2025]  (x) prohibit
- Recording in the registry of property binds  You can require notice be given
third persons
- Nevertheless : even without –still binding
NUMBER OF MORTGAGES IN ONE PROPERTY
between parties
 You may have more than one
CHARACTERISTICS (1) Real
 Only 1st mortgagee is registered
(2) Accessory
(3) Subsidiary  There’s a junior and senior mortgagees
KINDS a) Voluntary
b) Legal FOREIGNERS
c) Equitable –lacks formalities of mortgage  Can be mortgagees
FORM Any, but must be registered to bind 3P  Mortgage is not a disposition of property
 Can take possession upon default of mortgagor < only for the purpose of
REM vs. Pledge foreclosure and receivership in accordance with the prescribed judicial
 DR: (x) delivery procedures and in no case exceeding 5 years
 EX: Stipulation
WHEN CONFRONTED WITH FORECLOSURE PROBLEM
STEPS 1. Check if there’s a stipulation saying : private sale (Judicial/extra-judicial
(1) Make a Mortgage contract foreclosure
 2. Look at tell-tale signs DEFICIENCY There can always be recovery whether foreclosure is
 Is mortgagee a foreigner: if foreigner (judicial foreclosure) judicial/extra-judicial
 Not foreigner : look if there’s a stipulation in the mortgage - You just need to file a motion for court to render
agreement which gives the mortgagee SPA to carry out the deficiency judgment
extra-judicial foreclosure in accordance with Act 3135
 No stipulation ; RULES OF COURT REGISTRATION BY WINNING BIDDER
3. Look at the parties (1) Pay the necessary taxes (DST, CGT, Registration fees, update realty taxes
 Who is foreclosing? (2) Register property in his own name
Bank Act 3135/Sec 47 GBA
Not a bank Act 3135 RULE 68

Foreclosure of Real Estate Mortgage

WHEN THERE IS DEFAULT
 Usual remedies (1) Specific Performance + Damages [collection] (2) Section 1. Complaint in action for foreclosure. — In an action for the foreclosure of a
Foreclose mortgage or other encumbrance upon real estate, the complaint shall set forth the date
 DR: Judicial foreclosure under Rule 68 ROC and due execution of the mortgage; its assignments, if any; the names and residences of
the mortgagor and the mortgagee; a description of the mortgaged property; a
 JSP: Costly mistake. Stipulate extra-judicial foreclosure in the mortgage statement of the date of the note or other documentary evidence of the obligation
contract / some other mode of disposition secured by the mortgage, the amount claimed to be unpaid thereon; and the names and
 Rule 68: SUMMARY residences of all persons having or claiming an interest in the property subordinate in
(1) Complaint : stating ultimate facts (cause of action) –RTC having right to that of the holder of the mortgage, all of whom shall be made defendants in the
jurisdiction over the property action. (1a)
(2) Entry of judgment Section 2. Judgment on foreclosure for payment or sale. — If upon the trial in such
- Debtor ordered to pay within period of NOT LESS THAN 90 nor MORE action the court shall find the facts set forth in the complaint to be true, it shall
THAN 120 days from entry of judgment ascertain the amount due to the plaintiff upon the mortgage debt or obligation,
(3) Equity of Redemption including interest and other charges as approved by the court, and costs, and shall
render judgment for the sum so found due and order that the same be paid to the court
- Period within which debtor should pay the creditor
or to the judgment obligee within a period of not less than ninety (90) days nor more
- May be extended even beyond 120 days than one hundred twenty (120) days from the entry of judgment, and that in default of
(4) Foreclosure such payment the property shall be sold at public auction to satisfy the judgment. (2a)
- Non-payment within period above triggers this
GR No right of redemption after foreclosure Section 3. Sale of mortgaged property; effect. — When the defendant, after being
directed to do so as provided in the next preceding section, fails to pay the amount of
EX Law or contract allows redemption/ repurchase the judgment within the period specified therein, the court, upon motion, shall order the
property to be sold in the manner and under the provisions of Rule 39 and other
(5) Auction regulations governing sales of real estate under execution. Such sale shall not affect
- Made by the sheriff the rights of persons holding prior encumbrances upon the property or a part thereof,
(6) Sale and when confirmed by an order of the court, also upon motion, it shall operate to
divest the rights in the property of all the parties to the action and to vest their rights in
PROCEEDS APPLICATION the purchaser, subject to such rights of redemption as may be allowed by law.
(1) Cost
(2) Principal obligation Upon the finality of the order of confirmation or upon the expiration of the period of
(3) Balance, if any will be given based on the determination of the court who’s redemption when allowed by law, the purchaser at the auction sale or last
redemptioner, if any, shall be entitled to the possession of the property unless a third
entitled to it not necessarily the mortgagor ; it can be other creditors
party is actually holding the same adversely to the judgment obligor. The said
GR If there’s excess and there’s no other creditor/claimant : purchaser or last redemptioner may secure a writ of possession, upon motion, from the
excess will go to mortgagor court which ordered the foreclosure. (3a)
 Section 4. Disposition of proceeds of sale. — The amount realized from the foreclosure - In extra-judicial foreclosure : there must be a stipulation in the mortgage
sale of the mortgaged property shall, after deducting the costs of the sale, be paid to contract/document attached basically granting SPA to mortgagee to
the person foreclosing the mortgage, and when there shall be any balance or residue,
conduct foreclosure extrajudicially
after paying off the mortgage debt due, the same shall be paid to junior encumbrancers
in the order of their priority, to be ascertained by the court, or if there be no such - Conducted by Sheriff or notary public
encumbrancers or there be a balance or residue after payment to them, then to the
mortgagor or his duly authorized agent, or to the person entitled to it. (4a) WHO - You have to ask someone to do sale for you
- Go to relevant court, apply, pay filling fees sheriff
Section 5. How sale to proceed in case the debt is not all due. — If the debt for which assigned for you
the mortgage or encumbrance was held is not all due as provided in the judgment as
soon as a sufficient portion of the property has been sold to pay the total amount and
the costs due, the sale shall terminate; and afterwards as often as more becomes due WHERE - In the province where the property is located
for principal or interest and other valid charges, the court may, on motion, order more WHEN - Between 9 am to 4pm
to be sold. But if the property cannot be sold in portions without prejudice to the - If done outside, you have to assail it
parties, the whole shall be ordered to be sold in the first instance, and the entire debt NOTICE - Mere publication is sufficient
and costs shall be paid, if the proceeds of the sale be sufficient therefor, there being a REQUIREMENT - Personal notice requirement, only requirement is
rebate of interest where such rebate is proper. (5a)
posting publication in a newspaper of general
Section 6. Deficiency judgment. — If upon the sale of any real property as provided in circulation
the next preceding section there be a balance due to the plaintiff after applying the - Posting notices of same for not less than 20 days
proceeds of the sale, the court, upon motion, shall render judgment against the in at least 3 public places
defendant for any such balance for which, by the record of the case, he may be - Once a week for at least 3 consecutive weeks in
personally liable to the plaintiff, upon which execution may issue immediately if the newspaper of general circulation in the city or
balance is all due at the time of the rendition of the judgment; otherwise; the plaintiff municipality
shall be entitled to execution at such time as the balance remaining becomes due under REDEMPTION - Purchas price tendered during the auction
the terms of the original contract, which time shall be stated in the judgment. (6a)
PRICE - Winning bid at time of auction
Section 7. Registration. — A certified copy of the final order of the court confirming REDEMPTION - 1 year from the date of registration of the sale
the sale shall be registered in the registry of deeds. If no right of redemption exists, the PERIOD
certificate of title in the name of the mortgagor shall be cancelled, and a new one
issued in the name of the purchaser.

Where a right of redemption exists, the certificate of title in the name of the mortgagor
shall not be cancelled, but the certificate of sale and the order confirming the sale shall
be registered and a brief memorandum thereof made by the registrar of deeds upon the
certificate of title. In the event the property is redeemed, the deed of redemption shall
be registered with the registry of deeds, and a brief memorandum thereof shall be made ACT NO. 3135 - AN ACT TO REGULATE THE SALE OF PROPERTY UNDER
by the registrar of deeds on said certificate of title. SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES

If the property is not redeemed, the final deed of sale executed by the sheriff in favor of
the purchaser at the foreclosure sale shall be registered with the registry of deeds;
whereupon the certificate of title in the name of the mortgagor shall be cancelled and a
new one issued in the name of the purchaser. (n)
Section 8. Applicability of other provisions. — The provisions of sections 31, 32 and
34 of Rule 39 shall be applicable to the judicial foreclosure of real estate mortgages
under this Rule insofar as the former are not inconsistent with or may serve to
supplement the provisions of the latter. (8a)
ACT 3135
Section 1. When a sale is made under a special power inserted in or attached to any real-
estate mortgage hereafter made as security for the payment of money or the fulfillment of
any other obligation, the provisions of the following election shall govern as to the manner
in which the sale and redemption shall be effected, whether or not provision for the same is
made in the power.
Sec. 2. Said sale cannot be made legally outside of the province in which the property sold
is situated; and in case the place within said province in which the sale is to be made is
subject to stipulation, such sale shall be made in said place or in the municipal building of
the municipality in which the property or part thereof is situated.
Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in
at least three public places of the municipality or city where the property is situated, and if
such property is worth more than four hundred pesos, such notice shall also be published
once a week for at least three consecutive weeks in a newspaper of general circulation in
the municipality or city.
Sec. 4. The sale shall be made at public auction, between the hours or nine in the morning
and four in the afternoon; and shall be under the direction of the sheriff of the province, the
justice or auxiliary justice of the peace of the municipality in which such sale has to be
made, or a notary public of said municipality, who shall be entitled to collect a fee of five
pesos each day of actual work performed, in addition to his expenses.
Sec. 5. At any sale, the creditor, trustee, or other persons authorized to act for the creditor,
may participate in the bidding and purchase under the same conditions as any other bidder,
unless the contrary has been expressly provided in the mortgage or trust deed under which
the sale is made.
Sec. 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property subsequent to
the mortgage or deed of trust under which the property is sold, may redeem the same at any
time within the term of one year from and after the date of the sale; and such redemption
shall be governed by the provisions of sections four hundred and sixty-four to four hundred
and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with the provisions of this Act.
Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the
Court of First Instance of the province or place where the property or any part thereof is
situated, to give him possession thereof during the redemption period, furnishing bond in an
amount equivalent to the use of the property for a period of twelve months, to indemnify
the debtor in case it be shown that the sale was made without violating the mortgage or
without complying with the requirements of this Act. Such petition shall be made under
oath and filed in form of an ex parte motion in the registration or cadastral proceedings if
the property is registered, or in special proceedings in the case of property registered under
the Mortgage Law or under section one hundred and ninety-four of the Administrative
Code, or of any other real property encumbered with a mortgage duly registered in the
office of any register of deeds in accordance with any existing law, and in each case the
clerk of the court shall, upon the filing of such petition, collect the fees specified in
paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and
ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the
court shall, upon approval of the bond, order that a writ of possession issue, addressed to
the sheriff of the province in which the property is situated, who shall execute said order
immediately.
Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later
than thirty days after the purchaser was given possession, petition that the sale be set aside
and the writ of possession cancelled, specifying the damages suffered by him, because the
mortgage was not violated or the sale was not made in accordance with the provisions
hereof, and the court shall take cognizance of this petition in accordance with the summary
procedure provided for in section one hundred and twelve of Act Numbered Four hundred
and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his
favor of all or part of the bond furnished by the person who obtained possession. Either of
the parties may appeal from the order of the judge in accordance with section fourteen of
Act Numbered Four hundred and ninety-six; but the order of possession shall continue in
effect during the pendency of the appeal.
Sec. 9. When the property is redeemed after the purchaser has been given possession, the
redeemer shall be entitled to deduct from the price of redemption any rentals that said
purchaser may have collected in case the property or any part thereof was rented; if the
purchaser occupied the property as his own dwelling, it being town property, or used it
gainfully, it being rural property, the redeemer may deduct from the price the interest of
one per centum per month provided for in section four hundred and sixty-five of the Code
of Civil Procedure.
Sec. 10. This Act shall take effect on its approval.
Approved: March 6, 1924
RULE 39
WHO MAY -(a) The judgment obligor; or his successor in
REDEEM interest in the whole or any part of the property;
- (b) A creditor having a lien by virtue of an
attachment, judgment or mortgage on the property
sold, or on some part thereof, subsequent to the
lien under which the property was sold. Such
redeeming creditor is termed a redemptioner. (29a)
HOW Within 1 year from date of registration of the sale
REDEMPTION - Purchase price of the winning bidder
PRICE - + real property taxes and assessments
- Mortgagor (or whoever is redeeming the property
should pay the Purchase price of the property +
2% interest per month
JSP : not advisable to redeem : mortgagor exposes property to the mortgagee ; just
sue for deficiency
RULE 39
Execution, Satisfaction and Effect of Judgments
Section 27. Who may redeem real property so sold. — Real property sold as provided in
the last preceding section, or any part thereof sold separately, may be redeemed in the
manner hereinafter provided, by the following persons:
(a) The judgment obligor; or his successor in interest in the whole or any part of the
property;
(b) A creditor having a lien by virtue of an attachment, judgment or mortgage on the
property sold, or on some part thereof, subsequent to the lien under which the property was
sold. Such redeeming creditor is termed a redemptioner. (29a)
Section 28. Time and manner of, and amounts payable on, successive redemptions; notice
to be given and filed. — The judgment obligor, or redemptioner, may redeem the property
from the purchaser, at any time within one (1) year from the date of the registration of the
certificate of sale, by paying the purchaser the amount of his purchase, with the per
centum per month interest thereon in addition, up to the time of redemption, together with
the amount of any assessments or taxes which the purchaser may have paid thereon after
purchase, and interest on such last named amount at the same rate; and if the purchaser be
also a creditor having a prior lien to that of the redemptioner, other than the judgment
under which such purchase was made, the amount of such other lien, with interest.
Property so redeemed may again be redeemed within sixty (60) days after the last
redemption upon payment of the sum paid on the last redemption, with two per
centum thereon in addition and the amount of any assessments or taxes which the last
redemptioner may have paid thereon after redemption by him, with interest on such last
named amount, and in addition, the amount of any liens held by said last redemptioner
prior to his own, with interest. The property may be again, and as often as a redemptioner
is so disposed, redeemed from any previous redemptioner within sixty (60) days after the
last redemption, on paying the sum paid on the last previous redemption, with two per
centum thereon in addition, and the amounts of any assessments or taxes which the last
previous redemptioner paid after the redemption thereon, with interest thereon, and the
amount of any liens held by the last redemptioner prior to his own, with interest.
Written notice of any redemption must be given to the officer who made the sale and a
duplicate filed with the registry of deeds of the place, and if any assessments or taxes are
paid by the redemptioner or if he has or acquires any lien other than that upon which the
redemption was made, notice thereof must in like manner be given to the officer and filed
with the registry of deeds; if such notice be not filed, the property may be redeemed without
paying such assessments, taxes, or liens. (30a)
Section 29. Effect of redemption by judgment obligor, and a certificate to be delivered and
recorded thereupon; to whom payments on redemption made. — If the judgment obligor
redeems he must make the same payments as are required to effect a redemption by a
redemptioner, whereupon, no further redemption shall be allowed and he is restored to his
estate. The person to whom the redemption payment is made must execute and deliver to
him a certificate of redemption acknowledged before a notary public or other officer
authorized to take acknowledgments of conveyances of real property. Such certificate must
be filed and recorded in the registry of deeds of the place in which the property is situated
and the registrar of deeds must note the record thereof on the margin of the record of the
certificate of sale. The payments mentioned in this and the last preceding sections may be
made to the purchaser or redemptioner, or for him to the officer who made the sale. (31a)
Section 30. Proof required of redemptioner. — A redemptioner must produce to the officer,
or person from whom he seeks to redeem, and serve with his notice to the officer a copy of
the judgment or final order under which he claims the right to redeem, certified by the clerk
of the court wherein the judgment or final order is entered, or, if he redeems upon a
mortgage or other lien, a memorandum of the record thereof, certified by the registrar of
deeds, or an original or certified copy of any assignment necessary to establish his claim;
and an affidavit executed by him or his agent, showing the amount then actually due on the
lien. (32a)
Section 31. Manner of using premises pending redemption; waste restrained. — Until the
expiration of the time allowed for redemption, the court may, as in other proper cases,
restrain the commission of waste on the property by injunction, on the application of the
purchaser or the judgment 5blige, with or without notice; but it is not waste for a person in
possession of the property at the time of the sale, or entitled to possession afterwards,
during the period allowed for redemption, to continue to use it in the same manner in which
it was previously used, or to use it in the ordinary course of husbandry; or to make the
necessary repairs to buildings thereon while he occupies the property. (33a)
Section 32. Rents, earnings and income of property pending redemption. — The purchaser
or a redemptioner shall not be entitled to receive the rents, earnings and income of the
property sold on execution, or the value of the use and occupation thereof when such
property is in the possession of a tenant. All rents, earnings and income derived from the
property pending redemption shall belong to the judgment obligor until the expiration of
his period of redemption. (34a)
Section 33. Deed and possession to be given at expiration of redemption period; by whom
executed or given. — If no redemption be made within one (1) year from the date of the
registration of the certificate of sale, the purchaser is entitled to a conveyance and
possession of the property; or, if so redeemed whenever sixty (60) days have elapsed and
no other redemption has been made, and notice thereof given, and the time for redemption
has expired, the last redemptioner is entitled to the conveyance and possession; but in all
cases the judgment obligor shall have the entire period of one (1) year from the date of the
registration of the sale to redeem the property. The deed shall be executed by the officer
making the sale or by his successor in office, and in the latter case shall have the same
validity as though the officer making the sale had continued in office and executed it.
Upon the expiration of the right of redemption, the purchaser or redemptioner shall be
substituted to and acquire all the rights, title, interest and claim of the judgment obligor to
the property as of the time of the levy. The possession of the property shall be given to the
purchaser or last redemptioner by the same officer unless a third party adversely to the
judgment obligor. (35a)
SEC 47: GENERAL BANKING LAW
WHAT Mortgagor : Juridical person
Mortgagee: Bank
PERIOD Right to redeem –only for a period of 90 days or until
registration of sale [whichever comes first]
EXCPETIONS (1) Judicial foreclosure ; there is still a right to redeem
APPLICABLE (2) Redemption price
TO BANKS - Consists of
a) Amount of mortgage obligation
b) Interest on loan at rate stipulated in the
mortgage contract
c) Cost of sale incurred by bank
(3) Automatic Right of possession
- Purchaser automatically has right to possession after
confirmation of the sale
 (4) Injunction Specific - Amounts to abandonment of plegdge
(5) Period of redemption of juridical person Performance/Collection and mortgage
FORECLOSURE DR: Judicial foreclosure + deficiency
Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure, whether + remedies : notarial sale of things in pledge
judicially or extra-judicially, of any mortgage on real estate which is security for any loan
or other credit accommodation granted, the mortgagor or debtor whose real property has EFFECTS ON THE JUNIOR MORTGAGE
been sold for the full or partial payment of his obligation shall have the right within one
year after the sale of the real estate, to redeem the property by paying the amount due - If property was mortgaged for the second time, second mortgage is a
under the mortgage deed, with interest thereon at rate specified in the mortgage, and all subordinate to the first
the costs and expenses incurred by the bank or institution from the sale and custody of said - The first mortgage has the right to foreclose the mortgage upon default by
property less the income derived therefrom. However, the purchaser at the auction sale the debtor
concerned whether in a judicial or extra-judicial foreclosure shall have the right to enter RIGHTS OF THE JURNIOR MORTGAGEE
upon and take possession of such property immediately after the date of the confirmation of
the auction sale and administer the same in accordance with law. Any petition in court to IF THEN
enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this First mortgagee forecloses judicially Junior mortgagee may exercise equity
provision shall be given due course only upon the filing by the petitioner of a bond in an before sale is effected of redemption vested in the mortgagor
amount fixed by the court conditioned that he will pay all the damages which the bank may Junior mortgagee may satisfy the
suffer by the enjoining or the restraint of the foreclosure proceeding. Notwithstanding Act obligation of mortgagor to prevent sale
3135, juridical persons whose property is being sold pursuant to an extrajudicial of property
foreclosure, shall have the right to redeem the property in accordance with this provision
until, but not after, the registration of the certificate of foreclosure sale with the applicable
Extra-judicial sale is made Junior mortgagee may exercise the
Register of Deeds which in no case shall be more than three (3) months after foreclosure, mortgagor’s right to redeem within 1
whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to year from sale ; follow Act 3135—pay
the effectivity of this Act shall retain their redemption rights until their expiration. (78a) price at which property was sold
Property was sold for more than the Excess should be applied to payment
GBA ACT 3135 amount of obligation of the first of obligation to the second mortgagee
Redemption price : amount of Amount paid by the winning bidder mortgagee
principal obligation No excess Second mortgage is extinguished
JUDICIAL – 1 year from sale 1 year redemption period Second mortgagee may foreclose right Only one t claim right to exercise it
(registration) of redemption when the proper time comes
EXTRAJUDICIAL
- Natural person: 1 year from
registration
- Juridical person : 90 days or
until registration [whichever
comes first]
Winning bidder immediately takes Upon foreclosure : Mortgagor will
possession of propert continue possession of property
- If winning bidder wants to
get possession ; winning
bidder must file an action to
get possession and secure a
writ of possession

REMEDIES
CONCURRENCE AND PREFERENCE OF CREDIT General Provisions
 Possession by two or more creditors of equal rights or privileges over the
same property or all of the property of the debtor Article 2236. The debtor is liable with all his property, present and future, for
 Two or more creditors with separate claim against a debtor with insufficient the fulfillment of his obligations, subject to the exemptions provided by law.
property (1911a)
 The right to be paid first
 Exception to the general rule : pay the debt when it becomes due GR: All property : Present and future or the fulfillment of his obligations
 Preference applies after sale EX
 Must be asserted otherwise lost - Family home
 It must be maintained otherwise a debtor may be deemed to have abandoned - Support
claim of preference - Custodia Legis etc
 Not a lien, interest but mere preference with regard to the application of
proceeds Article 2237. Insolvency shall be governed by special laws insofar as they are
WHEN APPLICABLE : 2.CD.IP not inconsistent with this Code. (n)
1. 2 or more creditors Special Law > Code.
2. Separate and District Claims
3. Same Debtor Article 2238. So long as the conjugal partnership or absolute community
4. Insufficiency of property subsists, its property shall not be among the assets to be taken possession of by
the assignee for the payment of the insolvent debtor's obligations, except
 There must be a proceeding where creditors can file their claims insofar as the latter have redounded to the benefit of the family. If it is the
 Significant only after inventory and liquidation of properties husband who is insolvent, the administration of the conjugal partnership or
absolute community may, by order of the court, be transferred to the wife or to
LIEN PREFERENCE OF CREDIT a third person other than the assignee. (n)
CPG/AC (x)  Assets taken for payment of insolvent debtors obligations
- Charge particular to property Debt must be due CPG/AC (x) = individual spouse ; provided that
1. CPG/AC subsists
2. Obligations of insolvent spouse (x) redound to the benefit of the family

Article 2239. If there is property, other than that mentioned in the preceding
article, owned by two or more persons, one of whom is the insolvent debtor, his
undivided share or interest therein shall be among the assets to be taken
possession of by the assignee for the payment of the insolvent debtor's
obligations. (n)

Co-ownership other than CPG/ACP

Insolvency affects only the undivided share of the insolvent co-owner

TITLE XII Article 2240. Property held by the insolvent debtor as a trustee of an express or
CONCURRENCE AND PREFERENCE OF CREDITS implied trust, shall be excluded from the insolvency proceedings. (n)

Trustee (x) owner

CHAPTER 1 Art 2336 : Debtor is liable with all HIS property

CHAPTER 2
Classification of Credits
SOC
1. Special (2241-movable ; 2242- immovable)
2. Ordinary (real or personal properties
3. Common
SPECIAL PREFERRED CREDITS
 It just enumerates preferred claims (x) priority except for 1
 Upon movable itself
 Article 2246. Those credits which enjoy preference with respect to
specific movables, exclude all others to the extent of the value of the
personal property to which the preference refers
 Article 2247. If there are two or more credits with respect to the same
specific movable property, they shall be satisfied pro rata, after the
payment of duties, taxes and fees due the State or any subdivision
thereof. (1926a)
Du.Mi. Un. CreP. CreM LoSal La.TraLod SeReDe
Article 2241. With reference to specific movable property of the debtor, the
following claims or liens shall be preferred:
(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;
(2) Claims arising from misappropriation, breach of trust, or malfeasance
- by public officials committed
- in the performance of their duties,
- on the movables, money or securities obtained by them;
(3) Claims for the unpaid price of movables sold, on said movables,
- so long as they are in the possession of the debtor,
- up to the value of the same;
- and if the movable has been resold by the debtor and the price is still
unpaid,
- the lien may be enforced on the price;
- this right is not lost by the immobilization of the thing by destination,
- provided it has not lost its form, substance and identity;
- neither is the right lost by the sale of the thing together with other
property for a lump sum, when the price thereof can be determined
proportionally;
(4) Credits guaranteed with a pledge so long as the things pledged are in the
hands of the creditor, or those guaranteed by a chattel mortgage, upon the
things pledged or mortgaged, up to the value thereof;
(5) Credits for the making, repair, safekeeping or preservation of personal property,
- on the movable thus made, repaired, kept or possessed;
-
(6) Claims for laborers' wages, on the goods manufactured or the work done;
(7) For expenses of salvage, upon the goods salvaged;
(8) Credits between the landlord and the tenant
- arising from the contract of tenancy on shares, on the share of each in the
fruits or harvest;
(9) Credits for transportation, upon the goods carried,
- for the price of the contract
- and incidental expenses,
- until their delivery and for thirty days thereafter;
(10) Credits for lodging and supplies usually furnished to travellers by hotel keepers,
- on the movables belonging to the guest as long as such movables are in the
hotel, but not for money loaned to the guests;
(11) Credits for seeds and expenses for cultivation and harvest
- advanced to the debtor, upon the fruits harvested;
(12) Credits for rent for one year,
 - upon the personal property of the lessee existing on the immovable lease
- and on the fruits of the same,
- but not on money or instruments of credit;
(13) Claims in favor of the depositor
- if the depositary has wrongfully sold the thing deposited, upon the price of
the sale.
- In the foregoing cases, if the movables
- to which the lien or preference attaches have been wrongfully taken,
- the creditor may demand them from any possessor, within thirty days
from the unlawful seizure. (1922a
2242 (x) order of priority except for taxes imposed upon immovable
 Article 2248. Those credits which enjoy preference in relation to
specific real property or real rights, exclude all others to the extent
of the value of the immovable or real right to which the preference
refers.
 Article 2249. If there are two or more credits with respect to the
same specific real property or real rights, they shall be satisfied pro
rata, after the payment of the taxes and assessments upon the
immovable property or real right. (1927a)
Ta Un La Fu Mo Pre Anno Wa Do Ins
Article 2242. With reference to specific immovable property and real rights of
the debtor, the following claims, mortgages and liens shall be preferred, and
shall constitute an encumbrance on the immovable or real right:
(1) Taxes due upon the land or building;
(2) For the unpaid price of real property sold, upon the immovable sold;
 need not be registered
(3) Claims of laborers, masons, mechanics and other workmen, as well as of
architects, engineers and contractors, engaged in the construction, reconstruction or
repair of buildings, canals or other works, upon said buildings, canals or other
works;
(4) Claims of furnishers of materials used in the construction, reconstruction, or
repair of buildings, canals or other works, upon said buildings, canals or other
works;
(5) Mortgage credits recorded in the Registry of Property, upon the real estate
mortgaged;
(6) Expenses for the preservation or improvement of real property when the law
authorizes reimbursement, upon the immovable preserved or improved;
(7) Credits annotated in the Registry of Property,
- in virtue of a judicial order, by attachments or executions,
- upon the property affected,
- and only as to later credits;
 meaning preferred over other credits of the same nature which are
registered at a later date
 date basis of preference ; first one registered will be prioritized
(8) Claims of co-heirs for warranty in the partition of an immovable among
them,
- upon the real property thus divided;
(9) Claims of donors or real property
- for pecuniary charges or other conditions imposed upon the donee,
upon the immovable donated;
(10) Credits of insurers, upon the property insured, for the insurance premium
for two years. (1923a)
Article 2243. The claims or credits enumerated in the two preceding articles
- shall be considered as mortgages or pledges of real or personal
property, or liens
- within the purview of legal provisions governing insolvency.
- Taxes mentioned in No. 1, article 2241, and No. 1, article 2242, shall
first be satisfied. (n)
2144 Order of priority important
La Fu Ill Su Su FiCi Leg TaTa Quas Gif Cre
 Article 2250. The excess, if any, after the payment of the credits which
enjoy preference with respect to specific property, real or personal,
shall be added to the free property which the debtor may have, for the
payment of the other credits. (1928a)
 Article 2251. Those credits which do not enjoy any preference with
respect to specific property, and those which enjoy preference, as to
the amount not paid, shall be satisfied according to the following rules
 (1) In the order established in article 2244;
 (2) Common credits referred to in article 2245 shall be paid pro rata
regardless of dates. (1929a)
Article 2244. With reference to other property, real and personal, of the debtor,
the following claims or credits shall be preferred in the order named:
(1) Credits for services rendered the insolvent by employees, laborers, or
household helpers for one year preceding the commencement of the
proceedings in insolvency;
(2) Proper funeral expenses for the debtor, or children under his or her parental
authority who have no property of their own, when approved by the court;
(3) Expenses during the last illness of the debtor or of his or her spouse and children
under his or her parental authority, if they have no property of their own;
(4) Compensation due the laborers or their dependents under laws providing for
indemnity for damages in cases of labor accident, or illness resulting from the nature
of the employment;
(5) Credits and advancements made to the debtor for support of himself or herself,
and family, during the last year preceding the insolvency;
(6) Support during the insolvency proceedings, and for three months thereafter;
(7) Fines and civil indemnification arising from a criminal offense;
(8) Legal expenses, and expenses incurred in the administration of the insolvent's
estate for the common interest of the creditors, when properly authorized and
approved by the court;
(9) Taxes and assessments due the national government, other than those
mentioned in articles 2241, No. 1, and 2242, No. 1;
* taxes not imposed on a specific property
(10) Taxes and assessments due any province, other than those referred to in
articles 2241, No. 1, and 2242, No. 1;
(11) Taxes and assessments due any city or municipality, other than those
indicated in articles 2241, No. 1, and 2242, No. 1;
(12) Damages for death or personal injuries caused by a quasi-delict;
(13) Gifts due to public and private institutions of charity or beneficence;
(14) Credits which, without special privilege, appear in
(a) a public instrument; or
(b) in a final judgment,
- if they have been the subject of litigation.
- These credits shall have preference among themselves in the order of
priority of the dates of the instruments and of the judgments,
respectively. (1924a)
  Consider he dates
 Gr: does not include pledge or mortgage or an attachment to
specific property
 Ex: yung natira; naalala mo nung nagtaka ka about dun sa
remaining claim ni REM? Judgment yun; so consider mo to

Article 2245. Credits of any other kind or class, or by any other right or title
not comprised in the four preceding articles, shall enjoy no preference. (1925)

NOTES
Steps
1. Make an inventory
2. Group the Claims
a) Special Pref: Movable
b) Special Pref: Immovable
c) Ordinary Pref
d) Common
3. Satisfy Special Preferred
4. Update inventory & List of Creditors
a) Inventory Assets
b) List of ordinary preferred claims
c) List of common claims
5. Satisfy ordinary preference
6. Satisfy Common Claims
a) In proportion to the amount of credit regardless of the date
FINANCIAL REHABILITATION AND INSOLVENCY ACT (FRIA) \
 Legal proceedings hat may be taken in person in financial distress
REMEDIES AGAINST DEBTOR IN FINANCIAL DISTRESS UNDER FRIA
Rehabilitation Proceedings
Court Supervised Rehabilitation  Judicial
Proceedings
Pre-negotiated rehabilitation  In between creditor and debtor
who negotiate a rehabilitation
plan but submitted for court
approval
Out of court rehabilitation agreement  An agreement between debtor and
sufficient number of creditors that
will bind all creditors
Liquidation proceedings
Liquidation of asset of an insolvent  There is a discharge of liability
individual debtor (natural person) after the proceedings
Liquidation of the assets of juridical
persons

HOW JUR