Credit Transactions Flashcards
Types of Credit Transactions
Secured vs Unsecured
Secured - pledge / mortgage (with collateral or encumbrance of property)
Unsecured - only a promise to pay
Requisites for Pledge / Mortgage
FAFD
- for Fulfillment of a principal obligation
- Absolute owner of collateral at time of contract
- person has Free Disposal of property (or legal authority for that purpose)
Obligations that P / M Can Secure
Pledge / Mortgage are accessory contracts (cannot exist without valid obligation)
All obligations and contracts (Conditional, Rescissible, Voidable, Unenforceable)
XPN : Void Obligation
Third parties not party to the obligation may secure by pledging / mortgaging their own property
Explain the term.
Pactum Commissorium
Pledge
The creditor CANNOT appropriate or dispose the things he received by way of pledge / mortgage.
Any contrary stipulation is null and void.
Indivisibility of Contract for Pledge / Mortgage
Indivisible and debtor’s / creditor’s heir cannot demand or allow extinguishment of contract as long as debt is not completely satisfied.
Indivisibility is NOT applicable when : several things given and each one of them guarantees only a determinate portion of the credit
Pledge
What type of property do you give?
What happens after the obligation is fulfilled?
Where should the thing pledged be placed?
Movable property or document evidencing incorporeal rights
When the obligation is fulfiied, the thing shall be returned with all its fruits and accessions.
Placed in possession of creditor or third person by agreement.
Explain each rules.
Rules for Pledge
Fruits, income, dividends and interest of the thing pledged
“Fruits follow (still part of) principal” rule UNLESS stipulated.
Who is the owner of the thing pledged?
What can the creditor do?
- Within commerce of man and capable of possession.
- Fruits, income, dividends and interest of the thing pledged - creditor shall apply it to any amount due to him (If none is due to him = apply it to principal)
“Fruits follow (still part of) principal” rule UNLESS stipulated.
3. Interest and earnings of the right pledged
4. Offspring of pledge animals
Debtor continues to be the owner of the thing pledged. (XPN = expropriated)
Creditor may bring actions in order to recover it from or defend it against a third person
Deposit of the Thing Pledged With a Third Person
Part of Pledgee / Pledgor
Pledgee - if stipulated
Pledgor - if the thing is in danger of being lost or impaired (pledgee’s fault) or pledgee uses / misuses the thing
Fear of Destruction, Loss, Impairment WITHOUT Pledgee’s Fault
Pledgor - may demand the return of the thing (as long as he offer another thing for pledge that is same kind and not inferior quality)
Pledgee - may cause the same to be sold at a public sale (same if foreclosure sale or debtor has not paid)
Form of Pledge
No form is required
However, if you want to affect third persons:
- public instrument which contains description of the thing and date of pledge
Alienation (Sale) of Thing Pledged
Ownership and Possession
Allowed as long as with consent.
Ownership is trasmitted to vendee
Possession shall still continue to the creditor
Rights of Creditor / Pledgee
- Demand reimbursement of the expenses to preserve the thing
- Use the thing if authorized or for preservation of right (If used without the ff. above, pledgor may ask the thing to be judicially / extrajudicially deposited)
- Sell the thing upon default of the debtor
- If deceived by quality of the thing, he can claim another thing or demand immediate payment.
Obligations of a Pledgor
- To pay the debt, interest, and expenses
when they are due - Knowing the flaws of the thing pledge,
does not advise the pledge of the
same = liable for damages
Obligations of Creditor / Pledgee
- Take care of the thing pledged
- Liable for the loss or deterioration of the thing pledged (XPN: Due to fortuitous event)
- Responsible for the acts of his agents or employees
- Advise the pledger, without delay, of any danger to the thing pledged
- Deliver to the debtor the surplus
Extinguishment of Contract of Pledge
Thing pledged is returned
Renunciation or abandonment of pledge
Thing pledged is returned - extinguished (stipulation to contrary is void) = prima facie evidence na binalik na ni pledgee as long as wala na sa pledgee yung thing
Renunciation or abandonment of pledge - statement in writing = extinguished (acceptance or return of thing is not necessary)
Creditor’s Right of Appropriation
Pledgee
First auction
If not sold, second one with same formalities will be held
Second auction
If not sold, creditor may appropriate the thing pledged
Pledgor’s Right to Bid
Can the pledgee also bid?
He can bid
He has better right if he offer the same terms as the highest bidder.
Pledgee can also bid, but this is not valid if he is the only bidder.
Sale of the Thing
Pledge
Sale is more than the amount = debtor not entitled to excess (XPN : agreed)
Sale is less than the amount = creditor not entitled to deficiency
Basta nabenta, extinguished na yung obligation. (kahit more than or less than yung nakuhang pera)
Credit as Object of Pledge
If ni-pledge yung credit/promissory note tapos yung due niya is mauuna kaysa sa date ng pledge, pledgee may collect amount and apply it to the claim.
Rights of a Third Person Who Pledges His Own Movable Property to Secure the Debt of Another
- Indemnified (total debt, interest, expenses and damages)
- Subrogated as creditor (not prejudiced by waiver of defense)
-
Released from liability
- Creditor voluntarily accepts immovable or other property
- Extension of time is granted to debtor
- Pledgor not subrogated to the rights and thing is deteriorated (both through fault of creditor)
Other Rules in Pledge
- Pledgee advise the pledger of the results of public auction
- Any third person who has any right or to the thing pledged may satisfy the principal obligation
- Two or more pledged, pledgee may choose which he will cause to be sold, unless there is a stipulation
- Pawnshops which are involved in pledges = special laws and regulations shall be observed
Conventional Pledge vs Legal Pledge
Conventional - no demand is needed
Legal - demand is needed for foreclosure + can be done 1 month after
Conventional - deficiency cannot be recovered by creditor
Legal - can be recovered
Conventional - excess is generally to creditor
Legal - excess is to the debtor
Object of Real Estate Mortgage
Real property
Accessions
Improvements and Fruits
Rent and Income
Characteristic of Real Estate Mortgage
AIR (same as pledge) + C
Accessory, Indivisible, Real, Consensual
Equitable Mortgage
lacks formatlity or requisities by law, but its intention is for mortgage and nothing is contrary to law
Remedy = reformation
Form of Real Estate Mortgage
No form is required
However, if you want to affect third persons:
- public instrument which contains description of the thing and recorded in registry of property
Principal Obligation Covered
Real Estate Mortgage
GR : covers only what is stated in deed (even if less than the amount of loan)
XPN : stipulation to cover future advancements (dragnet clause)
Mortgage Credit is Transferable
The mortgage credit may be alienated or assigned to a third person with formalities required by law.
Pactum de Non-Aliendo
Real Estate Mortgage
Forbidding the owner from alienating the immovable mortgaged = VOID
Third Party Transferee
Real Estate Mortgage
Buyers are not affected by unregistered mortgage.
If registered,
- entitled to excess in foreclosure
- not liable for deficiency in foreclosure (XPN = novation)
Foreclosure
Real Estate Mortgage
Creditor may foreclose either
Judicially = post notice in 3 public places atleast 20 days prior
Extrajudicially = notice is not required unless stipulated
PROCEEDS
- More than unpaid amount = mortgagor is entitled to excess
- Less than unpaid amount = debtor is still liable
Why? Mortgage is only a means to recover the unpaid amount.
Redemption
Exists only in Real Estate Mortgage
Period to Redeem
Extrajudical
- GR : 1 year from date of foreclosure
- XPN : 3 months from sale / registration of certificate of sale (whichever is EARLIER)
- Creditor = bank
- Debtor = juridical person
Judicial
- 90 to 120 days, but practically exists as long as there is no confirmation of sale by court
Chattel Mortgage
Characteristics = AI (not Real)
Personal property which is recorded in Chattel Mortgage Register
What if not recorded and instead delivered? Regarded as PLEDGE
Form of Chattel Mortgage
Must be registered with Chattel Mortgage Registry
However, if you want to affect third persons:
- affidavit of good faith
Coverage of Chattel Mortgage
Debts existing at the time the contract was entered into (indicated in Affidavit of Good Faith)
What about subsequent obligations?
- amend the affidavit
Disposal of the Object During the Pendency of The Mortgage
Chattel Mortgage
a criminal act
Foreclosure
Chattel Mortgage
Must be extrajudicially
Notice : 10 days prior sale in 2 or more public places
PROCEEDS
- More than unpaid amount = mortgagor is entitled to excess
- Less than unpaid amount = debtor is still liable (XPN : sale in installment and recto law)
Pledge vs RE Mortgage vs Chattel Mortgage
Object
Pledge - movable and incorporeal rights
RE Mortgage - real property
Chattel Mortgage - personal property registered
Pledge vs RE Mortgage vs Chattel Mortgage
Perfection
Pledge - delivery (3rd party = public instrument)
RE Mortgage - consensual (3rd party = public instrument + recorded in registry of deeds)
Chattel Mortgage - registered (3rd party = affidavit of good faith)
Pledge vs RE Mortgage vs Chattel Mortgage
Possession
Pledge - transferred to pledgee (3rd party = public instrument)
RE Mortgage - retained by mortgagor
Chattel Mortgage - retained by mortgagor
Pledge vs RE Mortgage vs Chattel Mortgage
Principal Obligation Covered
Pledge - existing at time of pledge
RE Mortgage - stated in deed (XPN : dragnet clause)
Chattel Mortgage - indicated in affidavit (XPN : subsequent obligation if affidavit is amended)
Pledge vs RE Mortgage vs Chattel Mortgage
Sale of Thing During Pendency
Pledge - valid with consent of creditor
RE Mortgage - valid (contrary stipulation is void)
Chattel Mortgage - a criminal act
Pledge vs RE Mortgage vs Chattel Mortgage
Sale of Thing to Answer for Debt
Pledge - notary public
RE Mortgage - extrajudicial and judicial
Chattel Mortgage - extrajudicial
Pledge vs RE Mortgage vs Chattel Mortgage
Notice of Sale
Pledge - state the amount due (Legal = 1 month from demand)
RE Mortgage - extrajudicial (not required xpn stipulated) judicial (3 public places, atleast 20 days prior to sale)
Chattel Mortgage - 2 public places and 10 days prior to sale
Pledge vs RE Mortgage vs Chattel Mortgage
Creditor’s Right to Excess
Pledge - entitled (XPN : stipulated and legal pledge)
RE Mortgage - NOT entitled
Chattel Mortgage - NOT entitled
Pledge vs RE Mortgage vs Chattel Mortgage
Creditor’s Right to Deficiency
Pledge -NOT entitled
RE Mortgage - entitled
Chattel Mortgage - entitled (XPN : sale in installment or covered by recto law)
