I. What is Mortgage? It is a contract whereby the debtor secures to the creditor the fulfillmen t of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property which obligation shall be satisfied with the proceeds of the sale of said property or rights in case the said obligation is not complied with at the time stipulated. II. What are the kinds of mortgage? a. Voluntary- one which is agreed to between the parties or constituted by the will of the owner of the property on which it is created. b. Legal- one required by law to be executed in favor of certain persons. c. Equitable- one which lacks the proper formalities, words, or other requisites of a mortgage required by law, nevertheless reveals the intention of the parties to burden real property as a security for an existing debt, and contains nothing impossible or contrary to law III. What is the Doctrine of mortgagee in good faith? Reliance in good faith on certificate of title of mortgagor. – mortgagor. – A A mortgagee has a right to rely in good faith on the certificate c ertificate of title of the mortgagor of the property given as security and in the absence of any sign that might arouse suspicion, has no obligation to undertake further investigation. IV. Who are the parties in a contract of mortgage? a. Mortgagor- need not to be the debtor, however, he must be the absolute owner of the thing and must also have free disposal of the property and in the absence thereof, he must bel legally authorized for the purpose. b. Mortgagee- Lender
VI. What is the effect of the invalidity of mortgage on the principal obligation?
It does not render the principal obligation void. The obligation matures and becomes demandable in accordance with the stipulation to it. What is lost is the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. VII. Distinguish judicial foreclosure from extra judicial VIII. X obtained a loan for Php50Million from SSS Bank. The collateral is his vacation house in Baguio City under a real estate mortgage. X needed more funds for his business so he again borrowed another Php10Million, this time from BBB Bank, another bank, using the same collateral. The loan secured from SSS Bank fell due and X defaulted. (A) If SSS Bank forecloses the real estate mortgage, what rights, if any, are left with BBB Bank as mortgagee also? SUGGESTED ANSWER: BBB Bank, as junior mortgagee, would have a right to redeem the foreclosed property, together with X, his successors in interest, any judicial or judgement creditor of X, or any other person or entity having a lien on the vacation house subsequent to the real estate mortgage in favour of SSS Bank (i.e., other junior mortgagees, if any) (Sec. 6, Act 3135) (B) If the value of the Baguio property is less than the amount of loan, what would be the recourse of SSS Bank? BBB Bank? SUGGESTED ANSWER: In case of a deficiency, SSS bank could file suit to claim for the deficiency. BBB Bank could file an ordinary action to collect its loan from X. if it does so, it would be deemed to have waived its mortgage lien. If the judgement in the action to collect is favorable to BBB Bank, and it becomes final and executory , BBB Bank could enforce the said judgement by execution. It could even levy execution on the same mortgaged property, but it would not have priority over the latter. (Caltex Philippines v. IAC, et al., G.R. No. 74730, August 25, 1989)
(C) If the value of the property is more that the amount of the loan, who will benefit from the excess value of the property? SUGGESTED ANSWER: If the value of the property is more that the amount of the loan, the excess could benefit and be claimed by BBB Bank, any judicial or judgement creditor of X, any other junior mortgagee, and X. (D) If X defaulted with its loan in favor of BBB Bank but fully paid his loan with SSS Bank, can BBB Bank foreclose the real mortgage executed in its favor? SUGGESTED ANSWER: If X defaulted in respect of his loan from BBB Bank but fully paid his loan from SSS Bank, BBB Bank could now foreclose the mortgaged property as it would be the only remaining mortgagee of the same. (E) Does X have any legal remedy after the foreclosure in the event that later on he has the money to pay for the loan? SUGGESTED ANSWER: Yes, X could redeem the property within one (1) year from the date of registration of the sheriff’s certificate of foreclosure sale. (F) If SSS Bank and BBB Bank abandon their rights under the real estate mortgage, is there any legal recourse available to them? SUGGESTED ANSWER: SSS Bank and BBB Bank could each file an ordinary action to collect its loan from X.
VIII. Primetime Corporation (the Borrower) obtained a P10 Million, five-year term loan from Universal Bank (the Bank) in 1996. As security for the loan and as required by the Bank, the Borrower gave the following collateral security in favor of the Bank: 1) a real estate mortgage over the land and building owned by the Borrower and located in Quezon City; 2) the joint and several promissory note of Pr. Primo Timbol, the President of the Borrower; and 3) a real estate mortgage over the residential house and lot owned by Mr. Timbol, also located in Quezon City.Because of business reverses, neither the Borrower nor Mr. Timbol was able to pay the loan. In
June 2001, the Bank extrajudicially foreclosed the two real estate mortgages, with the Bank as the only bidder in the foreclosure sale. On September 16, 2001, the certificates of sale of the two properties in favor of the Bank were registered with the Register of Deeds of Quezon City. Ten months later, both the Borrower and Mr. Timbol were able to raise sufficient funds to redeem their respective properties from the Bank, but the Bank refused to permit redemption on the ground that the period for redemption had already expired, so that the Bank now has absolute ownership of both properties. The Borrower and Mr. Timbol came to you today, September 15, 2002, to find out if the position of the Bank is correct. What would be your answer? State your reasons. SUGGESTED ANSWER: 1 With respect to the real estate mortgage over the land and building owned by the Borrower, Primetime Corporation, a juridical body, the period of redemption is only three (3) months, which period already expired. 2 As to the real estate mortgage over the residential house and lot owned by Mr. Timbol, the period of redemption is one (1) year from the date of registration of the certificate of sale, which period has not yet expired in this case. IX. A contract in antichresis is always: A. A written contract; B. A contract, with a stipulation that the debt will be paid through receipt of the fruits of an immovable; C. Involves the payment of interests, if owing; D. All of the above E. Numbers 1 and 2 ANS: E. X. What are the characteristics of antichresis contract? XI. Compare antichresis and mortgage.
XII. Compare antichresis and pledge . XIII.What are the obligations of the antichretic debtor? XIV.What are the remedies of the antichretic creditor in case of nonpayment of the debt? XV. Olivia owns a vast mango plantation which she can no longer properly manage due to a lingering illness. Since she is indebted to Peter in the amount of P500.000.00 she asks Peter to manage the plantation and apply the harvest to the payment of her obligation to him, principal and interest, until her indebtedness shall have been fully paid. Peter agrees. 1) What kind of contract is entered into between Olivia and Peter? Explain. 2) What specific obligations are imposed by law on Peter as a consequence of their contract? 3) Does the law require any specific form for the validity of their contract? Explain 4) May Olivia re-acquire the plantation before her entire indebtedness shall have been fully paid? Explain.
XVI. Armando, a resident of Manila, borrowed P3-million from Bernardo, offering as security his 500 shares of stock worth P1.5-million in Xerxes Corporation, and his 2007BMW sedan, valued at P2-million. The mortgage on the shares of stock was registered in the Office of the Register of Deeds of Makati City where Xerxes Corporation has its principal office. The mortgage on the car was registered in the Office of the Register of Deeds of Manila. Armando executed a single Affidavit of Good Faith, covering both mortgages. Armando defaulted on the payment of his obligation; thus, Bernardo foreclosed on the two chattel mortgages. Armando filed suit to nullify the foreclosure and the mortgages, raising the following issues: (A) The execution of only one Affidavit of Good Faith for both mortgages invalidated the two mortgages;
(B) The mortgage on the shares of stocks should have been registered in the office of the Register of Deeds of Manila where he resides, as well as in the stock and transfer book of Xerxes Corporation. Rule on the foregoing issues with reasons. (C) Assume that Bernardo extrajudicially foreclosed on the mortgages, and both the car and the shares of stocks were sold at public auction. If the proceeds from such public sale should be 1-million short of Armando’s total obligation, can Bernardo recover the deficiency? Why or why not? XVII On January 1, 2008, Al obtained a loan of P10,000 from Bob to be paid on January 30, 2008, secured by a chattel mortgage on a Toyota motor car. OnFebruary 1, 2008, Al obtained another loan of P10,000 from Bob to be paid on February 15, 2008. He secured this by executing a chattel mortgage on a Honda motorcycle. On the due date of the first loan Al failed to pay. Bob foreclosed the chattel mortgage but the car was bidded for P6,000 only. Al also failed to pay the second loan due on February 15, 2008. Bob filed an action for collection of sum of money. Al filed a motion to dismiss claiming that Bob should first foreclose the mortgage on The Honda motorcycle before he can file the action for sum of money. Decide with reasons. XVIII. How long can the equity of redemption be exercised in the foreclosure of chattel mortgage? XIX. Is there a recovery of deficiency in the foreclosure of chattel mortgage? XX. X and Y entered into a contract of chattel mortgage. In the deed of mortgage, the mortgaged property was described as: "1. A store No. 79 on Magallanes Street, municipality of Cebu, formerly belonging to T. Thakurdas, with all the merchandise, effects, wares, and other bazar goods contained on the said store. 2. A store No. 19 on Real Street, Iloilo, Panay, P. I., formerly belonging to Guillermo Asayas, with all the merchandise, effects, wares and other bazar goods contained in the said store." The document contains no oath. (A) Was the contract of chattel mortgage entered into by X and Y valid? Why or why not?
(B) What is required as proper description of mortgaged property under the Chattel Mortgage Law?
XXI. Is a stipulation in the mortgage extending its scope and effect to afteracquired property valid? XXII. Distinctions between a Chattel Mortgage and a Pledge. XXIII. A, about to leave the country on a foreign assignment, entrusted to B his brand new car and its certificate of registration. Falsifying A's signature. B sold A's car to C for P200,000.00. C then registered the car in his name. To complete the needed amount, C borrowed P100.000.00 from the savings and loan association in his office, constituting a chattel mortgage on the car. For failure of C to pay the amount owed, the savings and loan association filed in the RTC a complaint for collection with application for issuance of a writ of replevin to obtain possession of the vehicle so that the chattel mortgage could be foreclosed. The RTC issued the writ of replevin. The car was then seized from C and sold by the sheriff at public auction at which the savings and loan association was the lone bidder. Accordingly, the car was sold to it. A few days later, A arrived from his foreign assignment. Learning of what happened to his car, A sought to recover possession and ownership of it from the savings and loan association. Can A recover his car from the savings and loan association? Explain your answer. XXIV. Lawrence, a retired air force captain, decided to go into the air transport business. He purchased an aircraft in cash except for an outstanding balanc e of P500,000.00. He incurred an indebtedness of P300,000.00 for repairs with an aircraft repair company. He also borrowed P1 Million from a bank for additional capital and constituted a chattel mortgage on the aircraft to secure the loan. While on a test flight the aircraft crashed causing physical injuries to a third party who was awarded damages of P200,000.00. Lawrence's insurance claim for damage to the aircraft was denied thus leaving him nothing else but the aircraft which insolvent. Assuming that the aircraft was sold for Pl Million, give the order of preference of the creditors of Lawrence and distribute the amount of P1 Million.
XXV. Vini constructed a building on a parcel of land he leased from Andrea. He chattel mortgaged the land to Felicia. When he could not pay Felicia, Felicia initiated foreclosure proceedings. Vini claimed that the building he had constructed on the leased land cannot be validly foreclosed because the building was, by law, an immovable. Is Vini correct?
XXVI. Define Concurrence of Credits This implies the possession by two or more creditors of equal rights or privileges over the same property or all of the property of the debtor. XXVII. Define Preference of Credits This is the right held by the creditor to be preferred in the payment of his claim above the others out of the debtor’s assets. It is a right to be paid first XXVIII. When does the rule of preference apply? a) There are two or more creditors; b) With separate and distinct claims; c) Against the same debtor; and d) Who has insufficient property.
XXIX Preference of Credit versus Lien Preference of credit applies only to claims which do not attach to specific properties. Lien, on the other hand, creates a charge on a particular property. Lien shall refer to the statutory or contractual claim or judicial charge on real or personal property for payment of the claim or debt secured by such lien. XXX. What are the properties exempted from debtor’s liability in the fulfillment of his obligations?
General Rule: Debtor is liable with all his property, present and future, for the fulfillment of his obligations. Exempted properties are the following: 1. Present property 2. Future property 3. Property under legal custody and those owned by municipal corporations necessary for governmental purposes XXXI. Explain the two-tier order of preference of credit a. The first-tier includes only taxes, duties and fees due on a specific movable of immovable property. b. Second-tier- All other special preferred (non-tax) credits. These credits are to be satisfied pari passu (equally) and pro rata, out of any residual value of the specific property to which such other credits relate.
XXXII. Enumerate the classifications of credits and briefly explain a. Specified preferred credits i. Considered as mortgages or pledges or real or personal property or liens within the purview of legal provisions governing insolvency. ii. Taxes due to the State shall first be satisfied b. Ordinary preferred credits – preferred in the order given by law c. Common credits- Credits of any other kind or class, or by any other right or title not comprised under Art. 2241-2244 shall enjoy no preference.
