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Regulatory Framework for Business Transactions > Law on Credit Transactions > Flashcards

Law on Credit Transactions Flashcards

1
Q

Requisites for a Contract of Pledge and Mortgage

A

a. Constituted for the fulfillment of a principal obligation.
b. Pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged, at the time the contract was entered into.
c. Person mentioned above have free disposal of their property and in the absence thereof, be legally authorized for that purpose.

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2
Q

Types of obligations/contracts that a pledge or mortgage may secure.

A
  1. Pure Obligations
  2. Conditional Obligations
  3. Obligations with a term
  4. Natural obligation
  5. Rescissible Contracts
  6. Voidable Contracts
  7. Unenforceable Contracts
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3
Q

Pactum Commisorium

A

Any stipulation wherein the creditor can appropriate the thing given by way of pledge or mortgage or dispose of the. (Void stipulation)

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4
Q

Can third person pledge their own property in favor of the debtor

A

Yes, they may pledge or mortgage their own property as long as they have absolute ownership and free disposal of the said property.

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5
Q

Can a co-debtor cancel his proportionate share of the mortgage upon paying his share in debt

A

No, because the contract of pledge and mortgage is an indivisible contract and cannot be extinguished until the whole principal debt is satisfied. Same goes for any co-creditors upon receiving proportionate share of credit.

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6
Q

What is a Pledge

A

A contract wherein debtor delivers to the creditor or third person movable or document evidencing incorporeal rights for the purpose of securing the fulfillment of a principal obligation.

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7
Q

Is delivery a requisite for pledge?

A

Pledge being a real contract, delivery is one of the requisites for a contract of pledge. The thing pledge be placed in the possession of the creditor or the third person by common agreement

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8
Q

Kinds of Pledges

A
  1. Voluntary or Conventional- created by agreement of the parties; or
  2. Legal- created by the operation of law
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9
Q

Characteristics of a Pledge

A
  1. Real Contract- perfected by the delivery of the thing pledged
  2. Accessory Contract- no independent existence on its own.
  3. Unilateral- Creates an obligation solely on the creditor to return the thing pledged
  4. Subsidiary- Obligation does not arise upon fulfillment of the original obligation
  5. Indivisible- Creates a lien on the whole or all of the properties pledged
  6. Nominate- Has a name given by the law and there are specific rules to be followed.
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10
Q

Cause or Consideration in a contract of pledge

A
  1. Pledgor/debtor- the principal obligation
  2. Third person- compensation stipulated or mere liberality
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11
Q

Object of Pledge

A
  1. Movable Property
  2. Incorporeal rights, evidenced by specific documents including shares of stock, bonds, warehouse receipts, and similar documents.
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12
Q

What happens when the thing pledged produces fruits, earns income, dividends, or interests?

A

The creditor will compensate what he receives that are owing to him (interest), but if none are owing to him, he shall apply it to the principal.

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13
Q

Who owns the thing pledged

A

Ownership still remains with the debtor unless expropriated

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14
Q

What happens if there is fear of destruction, impairment, or loss without pledgee’s fault

A
  1. The pledgor may demand the return of the thing upon offering another thing pledged provided the latter is the same kind (same quality).
  2. The pledgee may cause the same to be sold at a public sale (proceeds will be the security for the principal obligation)
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15
Q

Requirements for pledge to affect third persons

A
  1. Must be in a public instrument
  2. Public instrument contains: description of the thing & date of the pledge
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16
Q

Is Alienation of the thing pledged allowed? Who owns the thing pledged?

A

Allowed with the consent of the pledgee. Ownership belongs now to the vendee, but the creditor-pledgee continues to possess the thing pledged.

17
Q

Can the pledgee use thing pledged

A

General rule: Cannot use the thing without authority from the owner.
Exceptions:
1. Authority from owner
2. Preservation of the thing requires its use, and must be only for that purpose

18
Q

When is the contract of pledge extinguished?

A
  1. The thing pledge is returned to the pledgor.
  2. Renunciation or abandonment of pledge
    (Must be in a statement in writing stating abandonment written by pledgee.)
19
Q

Foreclosure Sale of the thing pledge

A
  1. When the deb has not been satisfied, pledgee proceeds to Notary Public to the sale of the thing pledged.
  2. Sale must be in a public auction
  3. Notification must be given to debtor and the owner of thing pledge stating the amount for which sale is to be held
20
Q

Creditor’s right of appropriation

A

Can only appropriate after no sale from the second auction.

21
Q

What happens to the proceeds when the thing is sold?

A

If the proceeds are more than the principal debt, debtor shall not be entitled to the excess unless agreed upon.
If the proceeds are less than the principal debt, the creditor shall not be entitled to recover the deficiency unless stipulated.

22
Q

Examples of Legal Pledge

A
  1. A possessor in good faith may retain the movable property in which he incurred necessary and useful expenses until he has been reimbursed.
  2. He who has executed work upon a movable property has right to retain until he has been paid.
  3. Depositary may retain the thing deposited until full payment of whatever the reason for the deposit
23
Q

Distinctions between legal pledge and conventional pledge

A
  1. Foreclosure sale in legal pledge need a demand and can only be done 1 month after.
  2. Deficiency in public sale of legal pledge allows for deficiency to be recovered by the creditor.
  3. Excess in a public sale of legal pledge will go to the debtor
24
Q

Objects in Real Estate Mortgage

A
  1. Immovable Property
  2. Alienable rights in accordance with laws imposed upon immovables
25
Q

Characteristics of a Real Estate Mortgage

A
  1. Accessory- cannot exist independently on its own
  2. Indivisible- creates a lien on the whole or all of the properties mortgaged
  3. Inseparable- subjects the property to the fulfillment of the obligation for whose security was constituted
  4. Real Right- creates a lien on the property mortgaged even against third party possessors in good faith.
  5. Consensual- perfected by mere consent
  6. Nominate- has a name given by law and specific rules apply to it
26
Q

Types of Real Estate Mortgage

A
  1. Conventional- created by agreement of the parties
  2. Legal- executed pursuant to an express requirement of a provision of law.
  3. Equitable- lacks formality, but intentions show to charge the real property as a security for a debt.
27
Q

Form of Real Estate Mortgage

A

No form required to constitute a real estate mortgage; but to affect third persons:
1. must be in a public instrument
2. recorded in the Registry of Property

28
Q

Pactum de non-aliendo

A

A stipulation prohibiting/forbidding the owner to alienate the immovable property mortgaged.

29
Q

Proceed in a foreclosure sale of a property under real estate morgage

A

If proceeds are greater than unpaid amount, mortgagor shall receive the excess
If proceeds are less than upnpaid amount, mortgagee shall be entitled to recover deficiency

30
Q

Period of Redemption

A

Extrajudicial- General Rule is 1 year, but under general banking law, 3 months if the debtor is juridical person and creditor is banker

31
Q

Equity of Redemption

A

Applicable to Judicial Foreclosure only and the rules for equity of redemption is 90 to 120 days as long as no confirmation of sale by the court

32
Q

Object of Chattel Mortgage

A

Personal Property is recorded in the Chattel Mortgage Register as a security for performance of obligation. If there is delivery than it constitutes a pledge

33
Q

Characteristics of a Chattel Mortgage

A
  1. Accessory- cannot exist independently on its own
  2. Indivisible- creates a lien on the whole or all of the properties mortgaged
  3. Inseparable- subjects the property to the fulfillment of the obligation whose security it was constituted
  4. Formal- perfected by registration to chattel mortgage register
  5. Nominate- has a name provided by law and has specific rules
34
Q

Foreclosure Sale of property under Chattel Mortgage

A

Can only be done extrajudicially. Notice is 10 days prior sale

35
Q

Proceeds of Foreclosure sale of property under Chattel Mortgage

A

Proceeds greater than unpaid amount, mortgagor shall be entitled to excess
Proceeds less than unpaid amount, creditor can recover deficiency unless installment sales then recto law will prevail

36
Q

Redemption period for Chattel Mortgage

A

None because only foreclosure of Real Estate Mortgage has redemption period.

Regulatory Framework for Business Transactions (22 decks)

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