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CREDIT TRANSACTIONS REVIEWERsingco.salva.pagador.omolon.niemes.millan.espina

1

CHAPTER P!ED"E

Ar#. $%&. In addi#ion #o #'e re()isi#esprescri*ed in Ar#icle $+,- i# is necessar- inorder #o cons#i#)#e #'e con#rac# o/ pledge-#'a# #'e #'ing pledged *e placed in #'epossession o/ #'e credi#or- or o/ a #'irdperson * common agreemen#. 01+&2

Ar#. $%3. All mova*les 4'ic' are 4i#'incommerce ma *e pledged- provided #'eare s)scep#i*le o/ possession. 01+32

Ar#. $%,. Incorporeal rig'#s- evidenced *nego#ia*le ins#r)men#s- *ills o/ lading- s'areso/ s#oc5- *onds- 4are'o)se receip#s and

similar doc)men#s ma also *e pledged. T'eins#r)men# proving #'e rig'# pledged s'all *edelivered #o #'e credi#or- and i/ nego#ia*le-m)s# *e indorsed. 0n2

Ar#. $%. A pledge s'all no# #a5e e6ec#agains# #'ird persons i/ a descrip#ion o/ #'e#'ing pledged and #'e da#e o/ #'e pledge dono# appear in a p)*lic ins#r)men#. 01+,a2

Ar#. $%7. Wi#' #'e consen# o/ #'e pledgee-#'e #'ing pledged ma *e aliena#ed * #'e

pledgor or o4ner- s)*8ec# #o #'e pledge. T'eo4ners'ip o/ #'e #'ing pledged is#ransmi##ed #o #'e vendee or #rans/eree assoon as #'e pledgee consen#s #o #'ealiena#ion- *)# #'e la##er s'all con#in)e inpossession. 0n2

Ar#. $%+. T'e con#rac# o/ pledge gives arig'# #o #'e credi#or #o re#ain #'e #'ing in 'ispossession or in #'a# o/ a #'ird person #o4'om i# 'as *een delivered- )n#il #'e de*# ispaid. 01+a2

Ar#. $%%. T'e credi#or s'all #a5e care o/ #'e#'ing pledged 4i#' #'e diligence o/ a good/a#'er o/ a /amil9 'e 'as a rig'# #o #'ereim*)rsemen# o/ #'e e:penses made /or i#spreserva#ion- and is lia*le /or i#s loss orde#eriora#ion- in con/ormi# 4i#' #'eprovisions o/ #'is Code. 01+72

Ar#. 1$$. T'e pledgee canno# deposi# #'e#'ing pledged 4i#' a #'ird person- )nless#'ere is a s#ip)la#ion a)#'ori;ing 'im #o doso.

T'e pledgee is responsi*le /or #'e ac#s o/ 'isagen#s or emploees 4i#' respec# #o #'e#'ing pledged. 0n2

Ar#. 1$1. T'e pledgor 'as #'e sameresponsi*ili# as a *ailor in commoda#)m in#'e case )nder Ar#icle 1%,1. 0n2

Ar#. 1$. I/ #'e pledge earns or prod)ces/r)i#s- income- dividends- or in#eres#s- #'ecredi#or s'all compensa#e 4'a# 'e receives4i#' #'ose 4'ic' are o4ing 'im9 *)# i/ noneare o4ing 'im- or inso/ar as #'e amo)n# mae:ceed #'a# 4'ic' is d)e- 'e s'all appl i# #o#'e principal. <nless #'ere is a s#ip)la#ion #o#'e con#rar- #'e pledge s'all e:#end #o #'ein#eres# and earnings o/ #'e rig'# pledged.

In case o/ a pledge o/ animals- #'eir o6springs'all per#ain #o #'e pledgor or o4ner o/ animals pledged- *)# s'all *e s)*8ec# #o #'epledge- i/ #'ere is no s#ip)la#ion #o #'econ#rar. 01++a2

Ar#. 1$&. <nless #'e #'ing pledged is

e:propria#ed- #'e de*#or con#in)es #o *e #'eo4ner #'ereo/.

Never#'eless- #'e credi#or ma *ring #'eac#ions 4'ic' per#ain #o #'e o4ner o/ #'e#'ing pledged in order #o recover i# /rom- orde/end i# agains# a #'ird person. 01+%2

Ar#. 1$3. T'e credi#or canno# )se #'e #'ingpledged- 4i#'o)# #'e a)#'ori# o/ #'e o4ner-and i/ 'e s'o)ld do so- or s'o)ld mis)se #'e#'ing in an o#'er 4a- #'e o4ner ma as5

#'a# i# *e 8)diciall or e:#ra8)dicialldeposi#ed. W'en #'e preserva#ion o/ #'e#'ing pledged re()ires i#s )se- i# m)s# *e)sed * #'e credi#or *)# onl /or #'a#p)rpose. 01+7$a2

Ar#. 1$,. T'e de*#or canno# as5 /or #'ere#)rn o/ #'e #'ing pledged agains# #'e 4ill o/ #'e credi#or- )nless and )n#il 'e 'as paid #'ede*# and i#s in#eres#- 4i#' e:penses in aproper case. 01+712

Ar#. 1$. I/ #'ro)g' #'e negligence or 4il/)lac# o/ #'e pledgee- #'e #'ing pledged is indanger o/ *eing los# or impaired- #'e pledgorma re()ire #'a# i# *e deposi#ed 4i#' a #'irdperson. 0n2

Ar#. 1$7. I/ #'ere are reasona*le gro)nds #o/ear #'e des#r)c#ion or impairmen# o/ #'e#'ing pledged- 4i#'o)# #'e /a)l# o/ #'epledgee- #'e pledgor ma demand #'e re#)rno/ #'e #'ing- )pon o6ering ano#'er #'ing inpledge- provided #'e la##er is o/ #'e same5ind as #'e /ormer and no# o/ in/erior ()ali#-and 4i#'o)# pre8)dice #o #'e rig'# o/ #'epledgee )nder #'e provisions o/ #'e /ollo4ingar#icle.

T'e pledgee is *o)nd #o advise #'e pledgor-4i#'o)# dela- o/ an danger #o #'e #'ingpledged. 0n2




Ar#. 1$+. I/- 4i#'o)# #'e /a)l# o/ #'e pledgee-#'ere is danger o/ des#r)c#ion- impairmen#-or dimin)#ion in val)e o/ #'e #'ing pledged-'e ma ca)se #'e same #o *e sold a# a p)*licsale. T'e proceeds o/ #'e a)c#ion s'all *e asec)ri# /or #'e principal o*liga#ion in #'esame manner as #'e #'ing originall pledged.0n2

Ar#. 1$%. I/ #'e credi#or is deceived on #'es)*s#ance or ()ali# o/ #'e #'ing pledged- 'ema ei#'er claim ano#'er #'ing in i#s s#ead-or demand immedia#e pamen# o/ #'eprincipal o*liga#ion. 0n2

Ar#. 11$. I/ #'e #'ing pledged is re#)rned *#'e pledgee #o #'e pledgor or o4ner- #'e

pledge is e:#ing)is'ed. An s#ip)la#ion #o #'econ#rar s'all *e void.

I/ s)*se()en# #o #'e per/ec#ion o/ #'e pledge-#'e #'ing is in #'e possession o/ #'e pledgoror o4ner- #'ere is a prima /acie pres)mp#ion#'a# #'e same 'as *een re#)rned * #'epledgee. T'is same pres)mp#ion e:is#s i/ #'e#'ing pledged is in #'e possession o/ a #'irdperson 4'o 'as received i# /rom #'e pledgoror o4ner a/#er #'e cons#i#)#ion o/ #'e pledge.0n2

Ar#. 111. A s#a#emen# in 4ri#ing * #'epledgee #'a# 'e reno)nces or a*andons #'epledge is s)=cien# #o e:#ing)is' #'e pledge.>or #'is p)rpose- nei#'er #'e accep#ance *#'e pledgor or o4ner- nor #'e re#)rn o/ #'e#'ing pledged is necessar- #'e pledgee*ecoming a deposi#ar. 0n2

Ar#. 11. T'e credi#or #o 4'om #'e credi#'as no# *een sa#is?ed in d)e #ime- maproceed *e/ore a No#ar P)*lic #o #'e sale o/

#'e #'ing pledged. T'is sale s'all *e made a#a p)*lic a)c#ion- and 4i#' no#i?ca#ion #o #'ede*#or and #'e o4ner o/ #'e #'ing pledged ina proper case- s#a#ing #'e amo)n# /or 4'ic'#'e p)*lic sale is #o *e 'eld. I/ a# #'e ?rs#a)c#ion #'e #'ing is no# sold- a second one4i#' #'e same /ormali#ies s'all *e 'eld9 andi/ a# #'e second a)c#ion #'ere is no saleei#'er- #'e credi#or ma appropria#e #'e#'ing pledged. In #'is case 'e s'all *eo*liged #o give an ac()i##ance /or 'is en#ireclaim. 01+7a2

Ar#. 11&. A# #'e p)*lic a)c#ion- #'e pledgoror o4ner ma *id. He s'all- moreover- 'avea *e##er rig'# i/ 'e s'o)ld o6er #'e same#erms as #'e 'ig'es# *idder.

T'e pledgee ma also *id- *)# 'is o6er s'allno# *e valid i/ 'e is #'e onl *idder. 0n2

Ar#. 113. All *ids a# #'e p)*lic a)c#ion s'allo6er #o pa #'e p)rc'ase price a# once. I/ an o#'er *id is accep#ed- #'e pledgee isdeemed #o 'ave *een received #'e p)rc'aseprice- as /ar as #'e pledgor or o4ner isconcerned. 0n2

Ar#. 11,. T'e sale o/ #'e #'ing pledged s'alle:#ing)is' #'e principal o*liga#ion- 4'e#'eror no# #'e proceeds o/ #'e sale are e()al #o#'e amo)n# o/ #'e principal o*liga#ion-in#eres# and e:penses in a proper case. I/ #'eprice o/ #'e sale is more #'an said amo)n#-#'e de*#or s'all no# *e en#i#led #o #'e e:cess-)nless i# is o#'er4ise agreed. I/ #'e price o/ #'e sale is less- nei#'er s'all #'e credi#or *een#i#led #o recover #'e de?cienc-

no#4i#'s#anding an s#ip)la#ion #o #'econ#rar. 0n2

Ar#. 11. A/#er #'e p)*lic a)c#ion- #'epledgee s'all promp#l advise #'e pledgor oro4ner o/ #'e res)l# #'ereo/. 0n2

Ar#. 117. An #'ird person 4'o 'as an rig'#in or #o #'e #'ing pledged ma sa#is/ #'eprincipal o*liga#ion as soon as #'e la##er*ecomes d)e and demanda*le.0n2

Ar#. 11+. I/ a credi# 4'ic' 'as *een pledged*ecomes d)e *e/ore i# is redeemed- #'epledgee ma collec# and receive #'e amo)n#d)e. He s'all appl #'e same #o #'e pamen#o/ 'is claim- and deliver #'e s)rpl)s- s'o)ld#'ere *e an- #o #'e pledgor. 0n2

Ar#. 11%. I/ #4o or more #'ings are pledged-#'e pledgee ma c'oose 4'ic' 'e 4ill ca)se#o *e sold- )nless #'ere is a s#ip)la#ion #o #'econ#rar. He ma demand #'e sale o/ onl asman o/ #'e #'ings as are necessar /or #'e

pamen# o/ #'e de*#. 0n2

Ar#. 1$. I/ a #'ird par# sec)res ano*liga#ion * pledging 'is o4n mova*leproper# )nder #'e provisions o/ Ar#icle $+,'e s'all 'ave #'e same rig'#s as a g)aran#or)nder Ar#icles $ #o $7$- and Ar#icles$77 #o $+1. He is no# pre8)diced * an4aiver o/ de/ense * #'e principal o*ligor. 0n2

Ar#. 11. Pledges crea#ed * opera#ion o/ la4- s)c' as #'ose re/erred #o in Ar#icles ,3-17&1- and 1%%3- are governed * #'e/oregoing ar#icles on #'e possession- careand sale o/ #'e #'ing as 4ell as on #'e#ermina#ion o/ #'e pledge. Ho4ever- a/#erpamen# o/ #'e de*# and e:penses- #'eremainder o/ #'e price o/ #'e sale s'all *edelivered #o #'e o*ligor. 0n2

Ar#. 1. A #'ing )nder a pledge *opera#ion o/ la4 ma *e sold onl a/#er




&

demand o/ #'e amo)n# /or 4'ic' #'e #'ing isre#ained. T'e p)*lic a)c#ion s'all #a5e place4i#'in one mon#' a/#er s)c' demand. I/-4i#'o)# 8)s# gro)nds- #'e credi#or does no#ca)se #'e p)*lic sale #o *e 'eld 4i#'in s)c'period- #'e de*#or ma re()ire #'e re#)rn o/ #'e #'ing. 0n2

Ar#. 1&. Wi#' regard #o pa4ns'ops ando#'er es#a*lis'men#s- 4'ic' are engaged inma5ing loans sec)red * pledges- #'e specialla4s and reg)la#ions concerning #'em s'all*e o*served- and s)*sidiaril- #'e provisionso/ #'is Ti#le. 01+7&a2

CHAPTER &@ORT"A"E

Ar#. 13. Onl #'e /ollo4ing proper# ma*e #'e o*8ec# o/ a con#rac# o/ mor#gage

012 Immova*les9

02 Aliena*le real rig'#s in accordance4i#' #'e la4s- imposed )ponimmova*les.

Never#'eless- mova*les ma *e #'e o*8ec# o/ a c'a##el mor#gage. 01+73a2

Ar#. 1,. In addi#ion #o #'e re()isi#es s#a#edin Ar#icle $+,- i# is indispensa*le- in order#'a# a mor#gage ma *e validl cons#i#)#ed-#'a# #'e doc)men# in 4'ic' i# appears *erecorded in #'e Regis#r o/ Proper#. I/ #'eins#r)men# is no# recorded- #'e mor#gage isnever#'eless *inding *e#4een #'e par#ies.

T'e persons in 4'ose /avor #'e la4es#a*lis'es a mor#gage 'ave no o#'er rig'##'an #o demand #'e e:ec)#ion and #'erecording o/ #'e doc)men# in 4'ic' #'e

mor#gage is /ormali;ed. 01+7,a2

Ar#. 1. T'e mor#gage direc#l andimmedia#el s)*8ec#s #'e proper# )pon4'ic' i# is imposed- 4'oever #'e possessorma *e- #o #'e /)l?llmen# o/ #'e o*liga#ion/or 4'ose sec)ri# i# 4as cons#i#)#ed. 01+72

Ar#. 17. T'e mor#gage e:#ends #o #'ena#)ral accessions- #o #'e improvemen#s-gro4ing /r)i#s- and #'e ren#s or income no#e# received 4'en #'e o*liga#ion *ecomesd)e- and #o #'e amo)n# o/ #'e indemni#gran#ed or o4ing #o #'e proprie#or /rom #'eins)rers o/ #'e proper# mor#gaged- or invir#)e o/ e:propria#ion /or p)*lic )se- 4i#'#'e declara#ions- ampli?ca#ions andlimi#a#ions es#a*lis'ed * la4- 4'e#'er #'ees#a#e remains in #'e possession o/ #'emor#gagor- or i# passes in#o #'e 'ands o/ a#'ird person. 01+772

Ar#. 1+. T'e mor#gage credi# ma *ealiena#ed or assigned #o a #'ird person- in4'ole or in par#- 4i#' #'e /ormali#ies re()ired* la4. 01+7+2

Ar#. 1%. T'e credi#or ma claim /rom a#'ird person in possession o/ #'e mor#gagedproper#- #'e pamen# o/ #'e par# o/ #'ecredi# sec)red * #'e proper# 4'ic' said#'ird person possesses- in #'e #erms and 4i#'#'e /ormali#ies 4'ic' #'e la4 es#a*lis'es.01+7%2

Ar#. 1&$. A s#ip)la#ion /or*idding #'e o4ner/rom aliena#ing #'e immova*le mor#gageds'all *e void. 0n2

Ar#. 1&1. T'e /orm- e:#en# andconse()ences o/ a mor#gage- *o#' as #o i#scons#i#)#ion- modi?ca#ion ande:#ing)is'men#- and as #o o#'er ma##ers no#incl)ded in #'is C'ap#er- s'all *e governed* #'e provisions o/ #'e @or#gage !a4 and o/ #'e !and Regis#ra#ion !a4. 01++$a2

CHAPTER 3ANTICHRESIS

Ar#. 1&. B #'e con#rac# o/ an#ic'resis #'e

credi#or ac()ires #'e rig'# #o receive #'e/r)i#s o/ an immova*le o/ 'is de*#or- 4i#' #'eo*liga#ion #o appl #'em #o #'e pamen# o/ #'e in#eres#- i/ o4ing- and #'erea/#er #o #'eprincipal o/ 'is credi#. 01++12

Ar#. 1&&. T'e ac#)al mar5e# val)e o/ #'e/r)i#s a# #'e #ime o/ #'e applica#ion #'ereo/ #o#'e in#eres# and principal s'all *e #'emeas)re o/ s)c' applica#ion. 0n2

Ar#. 1&3. T'e amo)n# o/ #'e principal and o/

#'e in#eres# s'all *e speci?ed in 4ri#ing9o#'er4ise- #'e con#rac# o/ an#ic'resis s'all *evoid. 0n2

Ar#. 1&,. T'e credi#or- )nless #'ere is as#ip)la#ion #o #'e con#rar- is o*liged #o pa#'e #a:es and c'arges )pon #'e es#a#e.

He is also *o)nd #o *ear #'e e:pensesnecessar /or i#s preserva#ion and repair.

T'e s)ms spen# /or #'e p)rposes s#a#ed in#'is ar#icle s'all *e ded)c#ed /rom #'e /r)i#s.01++2

Ar#. 1&. T'e de*#or canno# reac()ire #'een8omen# o/ #'e immova*le 4i#'o)# ?rs#'aving #o#all paid 4'a# 'e o4es #'ecredi#or.

B)# #'e la##er- in order #o e:emp# 'imsel/ /rom #'e o*liga#ions imposed )pon 'im *




3

#'e preceding ar#icle- ma al4as compel#'e de*#or #o en#er again )pon #'een8omen# o/ #'e proper#- e:cep# 4'en#'ere is a s#ip)la#ion #o #'e con#rar. 01++&2

Ar#. 1&7. T'e credi#or does no# ac()ire #'eo4ners'ip o/ #'e real es#a#e /or nonpamen#o/ #'e de*# 4i#'in #'e period agreed )pon.

Ever s#ip)la#ion #o #'e con#rar s'all *evoid. B)# #'e credi#or ma pe#i#ion #'e co)r#/or #'e pamen# o/ #'e de*# or #'e sale o/ #'ereal proper#. In #'is case- #'e R)les o/ Co)r#on #'e /oreclos)re o/ mor#gages s'all appl.01++3a2

Ar#. 1&+. T'e con#rac#ing par#ies ma

s#ip)la#e #'a# #'e in#eres# )pon #'e de*# *ecompensa#ed 4i#' #'e /r)i#s o/ #'e proper#4'ic' is #'e o*8ec# o/ #'e an#ic'resis-provided #'a# i/ #'e val)e o/ #'e /r)i#s s'o)lde:ceed #'e amo)n# o/ in#eres# allo4ed * #'ela4s agains# )s)r- #'e e:cess s'all *eapplied #o #'e principal. 01++,a2

Ar#. 1&%. T'e las# paragrap' o/ Ar#icle $+,-and Ar#icles $+% #o $%1 are applica*le #o#'is con#rac#. 01++a2

CHAPTER ,CHATTE! @ORT"A"E

Ar#. 13$. B a c'a##el mor#gage- personalproper# is recorded in #'e C'a##el @or#gageRegis#er as a sec)ri# /or #'e per/ormance o/ an o*liga#ion. I/ #'e mova*le- ins#ead o/ *eing recorded- is delivered #o #'e credi#or ora #'ird person- #'e con#rac# is a pledge andno# a c'a##el mor#gage. 0n2

Ar#. 131. T'e provisions o/ #'is Code onpledge- inso/ar as #'e are no# in conic#4i#' #'e C'a##el @or#gage !a4 s'all *eapplica*le #o c'a##el mor#gages. 0n2

Ti#le I. CONC<RRENCE AND PRE>ERENCEO> CREDITS

CHAPTER 1

"ENERA! PROVISIONS Ar#. &. T'e de*#or is lia*le 4i#' all 'isproper#- presen# and /)#)re- /or #'e/)l?llmen# o/ 'is o*liga#ions- s)*8ec# #o #'ee:emp#ions provided * la4. 01%11a2

Ar#. &7. Insolvenc s'all *e governed *special la4s inso/ar as #'e are no#inconsis#en# 4i#' #'is Code. 0n2

Ar#. &+. So long as #'e con8)galpar#ners'ip or a*sol)#e comm)ni# s)*sis#s-i#s proper# s'all no# *e among #'e asse#s #o*e #a5en possession o/ * #'e assignee /or#'e pamen# o/ #'e insolven# de*#orFso*liga#ions- e:cep# inso/ar as #'e la##er 'averedo)nded #o #'e *ene?# o/ #'e /amil. I/ i# is#'e ')s*and 4'o is insolven#- #'eadminis#ra#ion o/ #'e con8)gal par#ners'ip o/ a*sol)#e comm)ni# ma- * order o/ #'eco)r#- *e #rans/erred #o #'e 4i/e or #o a #'irdperson o#'er #'an #'e assignee. 0n2

Ar#. &%. I/ #'ere is proper#- o#'er #'an #'a#men#ioned in #'e preceding ar#icle- o4ned *#4o or more persons- one o/ 4'om is #'einsolven# de*#or- 'is )ndivided s'are or

in#eres# #'erein s'all *e among #'e asse#s #o*e #a5en possession o/ * #'e assignee /or#'e pamen# o/ #'e insolven# de*#orFso*liga#ions. 0n2

Ar#. 3$. Proper# 'eld * #'e insolven#de*#or as a #r)s#ee o/ an e:press or implied#r)s#- s'all *e e:cl)ded /rom #'e insolvencproceedings. 0n2

CHAPTER

C!ASSI>ICATION O> CREDITS Ar#. 31. Wi#' re/erence #o speci?c mova*leproper# o/ #'e de*#or- #'e /ollo4ing claimsor liens s'all *e pre/erred

012 D)#ies- #a:es and /ees d)e #'ereon#o #'e S#a#e or an s)*division #'ereo/9

02 Claims arising /rommisappropria#ion- *reac' o/ #r)s#- ormal/easance * p)*lic o=cialscommi##ed in #'e per/ormance o/ #'eir

d)#ies- on #'e mova*les- mone orsec)ri#ies o*#ained * #'em9

0&2 Claims /or #'e )npaid price o/ mova*les sold- on said mova*les- solong as #'e are in #'e possession o/ #'e de*#or- )p #o #'e val)e o/ #'esame9 and i/ #'e mova*le 'as *eenresold * #'e de*#or and #'e price iss#ill )npaid- #'e lien ma *e en/orcedon #'e price9 #'is rig'# is no# los# *#'e immo*ili;a#ion o/ #'e #'ing *

des#ina#ion- provided i# 'as no# los# i#s/orm- s)*s#ance and iden#i#9 nei#'eris #'e rig'# los# * #'e sale o/ #'e #'ing#oge#'er 4i#' o#'er proper# /or al)mp s)m- 4'en #'e price #'ereo/ can*e de#ermined propor#ionall9

032 Credi#s g)aran#eed 4i#' a pledgeso long as #'e #'ings pledged are in#'e 'ands o/ #'e credi#or- or #'ose




,

g)aran#eed * a c'a##el mor#gage-)pon #'e #'ings pledged ormor#gaged- )p #o #'e val)e #'ereo/9

0,2 Credi#s /or #'e ma5ing- repair-sa/e5eeping or preserva#ion o/ personal proper#- on #'e mova*le#')s made- repaired- 5ep# orpossessed9

02 Claims /or la*orersF 4ages- on #'egoods man)/ac#)red or #'e 4or5 done9

072 >or e:penses o/ salvage- )pon #'egoods salvaged9

0+2 Credi#s *e#4een #'e landlord and

#'e #enan#- arising /rom #'e con#rac# o/ #enanc on s'ares- on #'e s'are o/ eac' in #'e /r)i#s or 'arves#9

0%2 Credi#s /or #ranspor#a#ion- )pon #'egoods carried- /or #'e price o/ #'econ#rac# and inciden#al e:penses- )n#il#'eir deliver and /or #'ir# das#'erea/#er9

01$2 Credi#s /or lodging and s)pplies)s)all /)rnis'ed #o #ravellers * 'o#el

5eepers- on #'e mova*les *elonging #o#'e g)es# as long as s)c' mova*lesare in #'e 'o#el- *)# no# /or moneloaned #o #'e g)es#s9

0112 Credi#s /or seeds and e:penses/or c)l#iva#ion and 'arves# advanced#o #'e de*#or- )pon #'e /r)i#s'arves#ed9

012 Credi#s /or ren# /or one ear- )pon#'e personal proper# o/ #'e lesseee:is#ing on #'e immova*le leased andon #'e /r)i#s o/ #'e same- *)# no# onmone or ins#r)men#s o/ credi#9

01&2 Claims in /avor o/ #'e deposi#or i/ #'e deposi#ar 'as 4rong/)ll sold #'e#'ing deposi#ed- )pon #'e price o/ #'esale.

In #'e /oregoing cases- i/ #'e mova*les#o 4'ic' #'e lien or pre/erence

a##ac'es 'ave *een 4rong/)ll #a5en-#'e credi#or ma demand #'em /roman possessor- 4i#'in #'ir# das /rom#'e )nla4/)l sei;)re. 01%a2

Ar#. 3. Wi#' re/erence #o speci?cimmova*le proper# and real rig'#s o/ #'ede*#or- #'e /ollo4ing claims- mor#gages andliens s'all *e pre/erred- and s'all cons#i#)#ean enc)m*rance on #'e immova*le or realrig'#

012 Ta:es d)e )pon #'e land or*)ilding9

02 >or #'e )npaid price o/ realproper# sold- )pon #'e immova*lesold9

0&2 Claims o/ la*orers- masons-mec'anics and o#'er 4or5men- as 4ellas o/ arc'i#ec#s- engineers andcon#rac#ors- engaged in #'econs#r)c#ion- recons#r)c#ion or repairo/ *)ildings- canals or o#'er 4or5s-)pon said *)ildings- canals or o#'er4or5s9

032 Claims o/ /)rnis'ers o/ ma#erials

)sed in #'e cons#r)c#ion-recons#r)c#ion- or repair o/ *)ildings-canals or o#'er 4or5s- )pon said*)ildings- canals or o#'er 4or5s9

0,2 @or#gage credi#s recorded in #'eRegis#r o/ Proper#- )pon #'e reales#a#e mor#gaged9

02 E:penses /or #'e preserva#ion orimprovemen# o/ real proper# 4'en#'e la4 a)#'ori;es reim*)rsemen#-

)pon #'e immova*le preserved orimproved9

072 Credi#s anno#a#ed in #'e Regis#r o/ Proper#- in vir#)e o/ a 8)dicial order-* a##ac'men#s or e:ec)#ions- )pon#'e proper# a6ec#ed- and onl as #ola#er credi#s9

0+2 Claims o/ co'eirs /or 4arran# in#'e par#i#ion o/ an immova*le among#'em- )pon #'e real proper# #')s

divided9

0%2 Claims o/ donors or real proper#/or pec)niar c'arges or o#'ercondi#ions imposed )pon #'e donee-)pon #'e immova*le dona#ed9

01$2 Credi#s o/ ins)rers- )pon #'eproper# ins)red- /or #'e ins)rancepremi)m /or #4o ears. 01%&a2

Ar#. 3&. T'e claims or credi#s en)mera#edin #'e #4o preceding ar#icles s'all *econsidered as mor#gages or pledges o/ realor personal proper#- or liens 4i#'in #'ep)rvie4 o/ legal provisions governinginsolvenc. Ta:es men#ioned in No. 1- Ar#icle31- and No. 1- Ar#icle 3- s'all ?rs# *esa#is?ed. 0n2

Ar#. 33. Wi#' re/erence #o o#'er proper#-real and personal- o/ #'e de*#or- #'e




/ollo4ing claims or credi#s s'all *e pre/erredin #'e order named

012 Proper /)neral e:penses /or #'ede*#or- or c'ildren )nder 'is or 'erparen#al a)#'ori# 4'o 'ave noproper# o/ #'eir o4n- 4'en approved* #'e co)r#9

02 Credi#s /or services rendered #'einsolven# * emploees- la*orers- or'o)se'old 'elpers /or one earpreceding #'e commencemen# o/ #'eproceedings in insolvenc9

0&2 E:penses d)ring #'e las# illness o/ #'e de*#or or o/ 'is or 'er spo)se and

c'ildren )nder 'is or 'er paren#ala)#'ori#- i/ #'e 'ave no proper# o/ #'eir o4n9

032 Compensa#ion d)e #'e la*orers or#'eir dependen#s )nder la4s providing/or indemni# /or damages in cases o/ la*or acciden#- or illness res)l#ing /rom#'e na#)re o/ #'e emplomen#9

0,2 Credi#s and advancemen#s made#o #'e de*#or /or s)ppor# o/ 'imsel/ or

'ersel/- and /amil- d)ring #'e las#ear preceding #'e insolvenc9

02 S)ppor# d)ring #'e insolvencproceedings- and /or #'ree mon#'s#'erea/#er9

072 >ines and civil indemni?ca#ionarising /rom a criminal o6ense9

0+2 !egal e:penses- and e:pensesinc)rred in #'e adminis#ra#ion o/ #'einsolven#Fs es#a#e /or #'e commonin#eres# o/ #'e credi#ors- 4'en properla)#'ori;ed and approved * #'e co)r#9

0%2 Ta:es and assessmen#s d)e #'ena#ional governmen#- o#'er #'an #'osemen#ioned in Ar#icles 31- No. 1- and3- No. 19

01$2 Ta:es and assessmen#s d)e anprovince- o#'er #'an #'ose re/erred #o

in Ar#icles 31- No. 1- and 3- No.19

0112 Ta:es and assessmen#s d)e anci# or m)nicipali#- o#'er #'an #'oseindica#ed in Ar#icles 31- No. 1- and3- No. 19

012 Damages /or dea#' or personalin8)ries ca)sed * a ()asidelic#9

01&2 "i/#s d)e #o p)*lic and priva#eins#i#)#ions o/ c'ari# or *ene?cence9

0132 Credi#s 4'ic'- 4i#'o)# specialprivilege- appear in 0a2 a p)*licins#r)men#9 or 0*2 in a ?nal 8)dgmen#-i/ #'e 'ave *een #'e s)*8ec# o/ li#iga#ion. T'ese credi#s s'all 'avepre/erence among #'emselves in #'eorder o/ priori# o/ #'e da#es o/ #'eins#r)men#s and o/ #'e 8)dgmen#s-respec#ivel. 01%3a2

Ar#. 3,. Credi#s o/ an o#'er 5ind or class-or * an o#'er rig'# or #i#le no# comprised in#'e /o)r preceding ar#icles- s'all en8o nopre/erence. 01%,2

CHAPTER &ORDER O> PRE>ERENCE O> CREDITS

Ar#. 3. T'ose credi#s 4'ic' en8opre/erence 4i#' respec# #o speci?c mova*les-e:cl)de all o#'ers #o #'e e:#en# o/ #'e val)eo/ #'e personal proper# #o 4'ic' #'epre/erence re/ers.

Ar#. 37. I/ #'ere are #4o or more credi#s

4i#' respec# #o #'e same speci?c mova*leproper#- #'e s'all *e sa#is?ed pro ra#a-a/#er #'e pamen# o/ d)#ies- #a:es and /eesd)e #'e S#a#e or an s)*division #'ereo/.01%a2

Ar#. 3+. T'ose credi#s 4'ic' en8opre/erence in rela#ion #o speci?c realproper# or real rig'#s- e:cl)de all o#'ers #o#'e e:#en# o/ #'e val)e o/ #'e immova*le orreal rig'# #o 4'ic' #'e pre/erence re/ers.

Ar#. 3%. I/ #'ere are #4o or more credi#s4i#' respec# #o #'e same speci?c realproper# or real rig'#s- #'e s'all *e sa#is?edpro ra#a- a/#er #'e pamen# o/ #'e #a:es andassessmen#s )pon #'e immova*le proper#or real rig'#. 01%7a2

Ar#. ,$. T'e e:cess- i/ an- a/#er #'epamen# o/ #'e credi#s 4'ic' en8opre/erence 4i#' respec# #o speci?c proper#-real or personal- s'all *e added #o #'e /reeproper# 4'ic' #'e de*#or ma 'ave- /or #'e

pamen# o/ #'e o#'er credi#s. 01%+a2

Ar#. ,1. T'ose credi#s 4'ic' do no# en8oan pre/erence 4i#' respec# #o speci?cproper#- and #'ose 4'ic' en8o pre/erence-as #o #'e amo)n# no# paid- s'all *e sa#is?edaccording #o #'e /ollo4ing r)les

012 In #'e order es#a*lis'ed in Ar#icle 339




7

02 Common credi#s re/erred #o in Ar#icle3, s'all *e paid pro ra#a regardless o/ da#es. 01%%a2

P!ED"E

Ar#icles $%& $%I. Concep#

- Pledge is an accessor- real- )nila#eral con#rac# * vir#)e o/ 4'ic' #'e de*#or delivers#o #'e credi#or or a #'ird person mova*le proper# as sec)ri# /or #'e per/ormance o/ aspeci?c o*liga#ion )pon #'e /)l?llmen# o/ 4'ic' #'e #'ing m)s# *e re#)rned 4i#' i#saccessions and accessories.

II. Re()isi#es0Common #o pledge and mor#gage Ar#. $+, and $+721. cons#i#)#ed #o sec)re #'e /)l?llmen# o/ a principal o*liga#ion

. pledgor m)s# *e #'e a*sol)#e o4ner o/ #'e #'ing pledged&. person cons#i#)#ing #'e pledge m)s# 'ave /ree disposal o/ #'e proper#- or in #'e a*sence#'ereo/ #'a# #'e *e legall a)#'ori;ed /or #'e p)rpose

3. possession o/ #'e #'ing pledged 0mova*le2 is delivered #o #'e pledgee 0ac#)al no# merelsm*olic *)# ma incl)de cons#r)c#ive e.g. 5es o/ a 4are'o)se 4'ere #'e goods ares#oreddepending on #'e pec)liar circ)ms#ances2

To a6ec# #'ird persons,. p)*lic ins#r)men#. descrip#ion o/ #'e #'ing pledged7. da#e o/ #'e pledge

III. Elemen#sA. Par#ies G Capaci#- A pledgor 4'o is no# #'e de*#or 'as #'e rig'#s o/ a g)aran#or 0Ar#. $ #o Ar#. $7$

reim*)rsemen# and s)*roga#ion9 and Ar#. $77 #o Ar#. $+1 release2 and is no#pre8)dicial * an 4aiver o/ de/enses * #'e de*#or 0Ar#. 1$2.

B. O*8ec#- T'e O*8ec# 0#'ing given2 m)s# *e 0a2 mova*le9 0*2 4i#'in #'e commerce o/ man9 0c2

s)scep#i*le o/ possession 0Ar#icle $%32. I# ma *e mone- goods or credi#s andincl)des #'eir /r)i#s- in#eres#- and earnings 0Ar#. 1$2.

- I/ a 4are'o)se receip# is pledged- #'e pledgor re#ains o4ners'ip and *ears #'e ris5 o/ #'e loss o/ #'e goods represen#ed * #'e receip#.

E6ec# 4'ere cara*aos pledged no# ac#)all delivered #o #'e credi#or

EULOGIO BETITA vs. SIMEON GANZON, ALEJO DE LA FLOR, and CLEMENTEPEDRENA

Facts:Ths act!n s "#!$%ht t! #&c!v&# th& '!ss&ss!n !( (!$# ca#a"a!s )th da*a%&s.

D&(&ndant A+&! d& +a F+!# #&c!v&#&d a $d%*&nt a%anst T"$#ca B$ha-an. Und&# ths $d%*&nt th& d&(&ndant Gan!n, as sh&#(( +&v&d &/&c$t!n !n th& ca#a"a!s n 0$&st!n )hch)&#& (!$nd n th& '!ss&ss!n !( !n& S*!n Jacnt! "$t #&%st&#&d n th& na*& !( T"$#ca

B$ha-an.Th& '+ant((, E$+!%! B&tta, a th#d 'a#t- c+a* 1t&#c&#a2 a++&%&s that th& ca#a"a!s had

"&&n *!#t%a%&d t! h* and as &vd&nc& th&#&!( '#&s&nt&d a d!c$*&nt, "$t th& sh&#(( '#!c&&d&d)th th& sa+& !( th& an*a+s at '$"+c a$ct!n )h&#& th&- )&#& '$#chas&d "- th& d&(&ndantC+&*&nt& P&#d&na, and ths act!n )as th&#&$'!n "#!$%ht.

Iss$&:3h&th&# th& *&#& (+n% !( a '#vat& d!c$*&nt )th th& sh&#(( a(t&# th& +&v- !( &/&c$t!n canc#&at& a +&n !( '+&d%& s$'&#!# t! th& attach*&nt.




+

SC R$+n%:Th& a++&%&d '+&d%& s n&((&ctv&, "&ca$s& th& '+ant(( '+&d%&& n&v&# had act$a+

'!ss&ss!n !( th& '#!'&#t- )thn th& *&ann% th& Cv+ C!d&. B$t t s a#%$&d that at th& t*& !( th& +&v- th& an*a+s n 0$&st!n )&#& n th& '!ss&ss!n !( !n& S*!n Jacnt!4 that Jacnt! )as

th& '+ant((5s t&nant4 and that th& t&nant5s '!ss&ss!n )as th& '!ss&ss!n !( hs +and+!#d.

In !#d&# t! c!nstt$t& th& c!nt#act !( '+&d%&, that th& '+&d%& "& '+ac&d n th& '!ss&ss!n!( th& c#&dt!# !# !( a th#d '&#s!n a''!nt&d "- c!**!n c!ns&nt.

In hs c!**&nta#- !n ths a#tc+& Man#&sa sa-s:Ths #&0$st& s *!st &ss&nta+ and s cha#act&#stc !( a '+&d%& )th!$t )hch th& c!nt#actcann!t "& #&%a#d&d as &nt&#&d nt! !# c!*'+&t&d, "&ca$s&, '#&cs&+-, n ths d&+v&#- +&s th&s&c$#t- !( th& '+&d%&. Th&#&(!#&, nIt s, !( c!$#s&, &vd&nt that th& d&+v&#- !( '!ss&ss!n *'+&s a chan%& n th& act$a+ '!ss&ss!n !( th& '#!'&#t- '+&d%&d and that a *&#& s-*"!+c d&+v&#- s n!t s$((c&nt.

In th& '#&s&nt cas& th& an*a+s n 0$&st!n )&#& n th& '!ss&ss!n !( T"$#ca B$ha-anand S*!n Jacnt! "&(!#& th& a++&%&d '+&d%& )as &nt&#&d nt! and a''a#&nt+- #&*an&d )thth&* $nt+ th& &/&c$t!n )as +&v&d, and th&#& )as n! act$a+ d&+v&#- !( '!ss&ss!n t! th& '+ant(( h*s&+(. Th&#& )as th&#&(!#& n #&a+t- n! chan%& n '!ss&ss!n.F#!* )hat has "&&n sad t (!++!)s that th& $d%*&nt a''&a+&d (#!* *$st "& #&v&#s&d and t s!#d&#&d and ad$d%&d that th& '+ant(( ta6& n!thn% "- hs act!n. 3th!$t c!sts. S! !#d&#&d.

a. Incorporeal Rig'#s- Incorporeal Rig'#s ma *e pledged i/ presen#ed * doc)men#s 4'ic' m)s# *e

delivered or indorsed i/ nego#ia*le- #o #'e credi#or.

E6ec# o/ S#oc5 Assignmen#

LOPEZ vs. CA

>ac#sBeni#o H. !ope; o*#ained a loan in #'e amo)n# o/ P$-$$$.$$ /rom #'e Pr)den#ial Ban5 and Tr)s# Compan. He

e:ec)#ed a promissor no#e /or #'e same amo)n#- in /avor o/ #'e said Ban5- *inding 'imsel/ #o repa #'e said s)m oneear a/#er #'e said da#e- 4i#' in#eres# a# #'e ra#e o/ 1$ per ann)m. In addi#ion #o said promissor no#e- 'e e:ec)#edS)re# Bond No. 1313 in 4'ic' 'e- as principal- and P'ilippine American "eneral Ins)rance Co.- Inc. 0PHI!A@"EN2 ass)re#- *o)nd #'emselves 8oin#l and severall in /avor o/ Pr)den#ial Ban5 /or #'e pamen# o/ #'e s)m o/ P$-$$$.$$.

!ope; also e:ec)#ed in /avor o/ P'ilamgen an indemni# agreemen# 4'ere* 'e agreed #o indemni/ #'eCompan and 5eep i# indemni?ed and 'old #'e same 'armless /rom and agains# an and all damages- losses- cos#s-s#amps- #a:es- penal#ies- c'arges and e:penses o/ 4'a#ever 5ind and na#)re 4'ic' #'e Compan s'all or ma a# an #ime

s)s#ain or inc)r in conse()ence o/ 'aving *ecome s)re# )pon #'e *ond. A# #'e same #ime- !ope; e:ec)#ed a deed o/ assignmen# o/ 3-$$$ s'ares o/ #'e Bag)io @ili#ar Ins#i#)#ion en#i#led S#oc5 Assignmen# Separa#e /rom Cer#i?ca#e

Wi#' #'e e:ec)#ion o/ #'is deed o/ assignmen#- !ope; endorsed #'e s#oc5 cer#i?ca#e and delivered i# #oP'ilamgen. I# appears /rom #'e evidence on record #'a# #'e loan o/ P$-$$$.$$ 4as approved condi#ioned )pon #'epos#ing o/ a s)re# *ond o/ a *onding compan accep#a*le #o #'e *an5. T')s- !ope; pers)aded Emilio A*ello- Assis#an#E:ec)#ive VicePresiden# o/ P'ilamgen and mem*er o/ #'e Bond <nder 4ri#ing Commi##ee #o re()es# A##. Timo#eo J.S)ma4ang- Assis#an# Vice Presiden# and @anager o/ #'e Bonding Depar#men#- #o accommoda#e 'im in p)##ing )p #'e*ond agains# #'e sec)ri# o/ 'is s'ares o/ s#oc5 4i#' #'e Bag)io @ili#ar Ins#i#)#e- Inc. I# 4as #'eir )nders#anding #'a# i/ 'eco)ld no# pa #'e loan- VicePresiden# A*ello and Pio Pedrosa o/ #'e Pr)den#ial Ban5 4o)ld *) #'e s'ares o/ s#oc5s ando)# o/ #'e proceeds #'ereo/- #'e loan 4o)ld *e paid #o #'e Pr)den#ial Ban5. On J)ne - 1%$- !ope;F o*liga#ion ma#)red4i#'o)# i# *eing se##led.

Iss)ea2 W'ere a par# sells- assigns and #rans/ers and delivers s'ares o/ s#oc5 #o ano#'er- d)l endorsed in *lan5- inconsidera#ion o/ a con#ingen# o*liga#ion o/ #'e /ormer #o #'e la##er- and- #'e o*liga#ions 'aving arisen- #'e la##er ca)ses#'e s'ares o/ s#oc5 #o *e #rans/erred in i#s name- 4'a# is #'e 8)ridical na#)re o/ #'e #ransac#iona da#ion in pamen# or apledgeK

*2 W'ere #'e de*#or assigns #'e s'ares o/ s#oc5 #o #'e credi#or )nder an agreemen# *e#4een #'e la##er and de#ermina#e#'ird persons #'a# #'e la##er 4o)ld *) #'e s'ares o/ s#oc5 so #'a# #'e o*liga#ions co)ld *e paid o)# o/ #'e proceeds- 4as#'ere a nova#ion o/ #'e o*liga#ion * s)*s#i#)#ion o/ de*#orK

SC R)linga. T'e s#oc5 assignmen# is in #r)#' and in /ac#- a pledge.

Considering #'e e:plici# #erms o/ #'e deed denomina#ed S#oc5 Assignmen# Separa#e /rom Cer#i?ca#e-'erein*e/ore copied verbatim, !ope; sold- assigned and #rans/erred )n#o P'ilamgen #'e s#oc5s involved /or and inconsidera#ion o/ #'e o*liga#ions )nder#a5en * P'ilamgen )nder #'e #erms and condi#ions o/ #'e s)re# *ond e:ec)#ed* i# in /avor o/ #'e Pr)den#ial Ban5 and /or val)e received. On i#s /ace- i# is nei#'er pledge nor da#ion in pamen#. T'edoc)men# spea5s o/ an o)#rig'# sale as #'ere is a comple#e and )ncondi#ional dives#i#)re o/ #'e incorporeal proper#consis#ing o/ s#oc5s /rom !ope; #o P'ilamgen. T'e #rans/er appears #o 'ave *een an a*sol)#e conveance o/ #'e s#oc5s #oP'ilamgen whether or not !ope; de/a)l#s in #'e pamen# o/ P$-$$$.$$ #o Pr)den#ial Ban5. W'ile i# is a conveance in




%

considera#ion o/ a con#ingen# o*liga#ion- i# is no# i#sel/ a condi#ional conveance.

I# is #r)e #'a# i/ !ope; s'o)ld 4ell and #r)l per/orm and /)l?ll all #'e )nder#a5ings- covenan#s- #erms- condi#ions- andagreemen#s s#ip)la#ed in 'is promissor no#e #o Pr)den#ial Ban5- #'e o*liga#ion o/ P'ilamgen )nder #'e s)re# *ond4o)ld *ecome n)ll and void. Corollaril- #'e s#oc5 assignmen#- 4'ic' is predica#ed on #'e o*liga#ion o/ P'ilamgen )nder#'e s)re# *ond- 4o)ld necessaril *ecome n)ll and void li5e4ise- /or 4an# o/ ca)se or considera#ion )nder Ar#icle 1&, o/ #'e Ne4 Civil Code. B)# #'is is no# #'e case 'ere *eca)se aside /rom #'e o*liga#ions )nder#a5en * P'ilamgen )nder #'es)re# *ond- #'e s#oc5 assignmen# 'ad o#'er considera#ions re/erred #o #'erein as val)e received. Hence- *ased on #'e

mani/es# #erms #'ereo/- i# is an a*sol)#e #rans/er.

No#4i#'s#anding #'e e:press #erms o/ #'e S#oc5 Assignmen# Separa#e /rom Cer#i?ca#e- 'o4ever- We 'old andr)le #'a# #'e #ransac#ion s'o)ld no# *e regarded as an a*sol)#e conveance in vie4 o/ #'e circ)ms#ances o*#aining a# #'e#ime o/ #'e e:ec)#ion #'ereo/.I# s'o)ld *e remem*ered #'a# on J)ne - 1%,%- #'e da !ope; o*#ained a loan o/ P$-$$$.$$ /rom Pr)den#ial Ban5- !ope;e:ec)#ed a promissor no#e /or K$-$$$.$$- pl)s in#eres# a# #'e ra#e o/ #en 01$2 per cen# per ann)m- in /avor o/ saidBan5. He li5e4ise pos#ed a s)re# *ond #o sec)re 'is /)ll and /ai#'/)l per/ormance o/ 'is o*liga#ion )nder #'e promissorno#e 4i#' P'ilamgen as 'is s)re#. In re#)rn /or #'e )nder#a5ing o/ P'ilamgen )nder #'e s)re# *ond- !ope; e:ec)#ed on#'e same da no# onl an indemni# agreemen# *)# also a s#oc5 assignmen#.

T'e indemni# agreemen# and #'e s#oc5 assignmen# m)s# *e considered #oge#'er as rela#ed #ransac#ions *eca)se in order#o 8)dge #'e in#en#ion o/ #'e con#rac#ing par#ies- #'eir con#emporaneo)s and s)*se()en# ac#s s'all *e principallconsidered. T')s- considering #'a# #'e indemni# agreemen# conno#es a con#in)ing o*liga#ion o/ !ope; #o4ards P'ilamgen4'ile #'e s#oc5 assignmen# indica#es a comple#e disc'arge o/ #'e same o*liga#ion- #'e e:is#ence o/ #'e indemni#agreemen# 4'ere* !ope; 'ad #o pa a premi)m /or a period o/ one ear and agreed a# all #imes #o indemni/ P'ilamgeno/ an and all 5inds o/ losses 4'ic' #'e la##er mig'# s)s#ain * reason o/ i# *ecoming a s)re#- is inconsis#en# 4i#' #'e#'eor o/ an a*sol)#e sale /or and in considera#ion o/ #'e same )nder#a5ing o/ P'ilamgen. T'ere 4o)ld 'ave *een no

necessi# /or #'e e:ec)#ion o/ #'e indemni# agreemen# i/ #'e s#oc5 assignmen# 4as reall in#ended as an a*sol)#econveance. Hence- #'ere are s#rong and cogen# reasons #o concl)de #'a# #'e par#ies in#ended said s#oc5 assignmen# #ocomplemen# #'e indemni# agreemen# and #'ere* s)=cien#l g)aran#ee #'e indemni?ca#ion o/ P'ilamgen s'o)ld i# *ere()ired #o pa !ope;F loan #o Pr)den#ial Ban5.

T'e /ollo4ing re()iremen#s o/ a con#rac# o/ pledge 'ave *een sa#is?ed 012 #'a# i# *e cons#i#)#ed #o sec)re #'e/)l?llmen# o/ a principal o*liga#ion9 02 #'a# #'e pledgor *e #'e a*sol)#e o4ner o/ #'e #'ing pledged9 and 0&2 #'a# #'eperson cons#i#)#ing #'e pledge 'as #'e /ree disposal o/ #'e proper#- and in #'e a*sence #'ereo/- #'a# 'e *e legalla)#'ori;ed /or #'e p)rpose.

Ar#icle $+7 o/ #'e Ne4 Civil Code providing #'a# i# is also #'e essence o/ #'ese con#rac#s 0pledge- mor#gage- andan#ic'resis2 #'a# 4'en #'e principal o*liga#ion *ecomes d)e- #'e #'ings in 4'ic' #'e pledge or mor#gage consis#s ma *ealiena#ed /or #'e pamen# #o #'e credi#or- /)r#'er s)ppor#s #'e co)r#Fs r)ling.In case o/ do)*# as #o 4'e#'er a #ransac#ion is a pledge or a da#ion in pamen#- #'e pres)mp#ion is in /avor o/ pledge- #'ela##er *eing #'e lesser #ransmission o/ rig'#s and in#eres#s.

*. No nova#ion #oo5 place.

<nder Ar#icle 1%1 o/ #'e Ne4 Civil Code- o*liga#ions ma *e modi?ed * 012 c'anging #'eir o*8ec# or principalcondi#ion9 02 s)*s#i#)#ing #'e person o/ #'e de*#or9 0&2 s)*roga#ing a #'ird person in #'e rig'#s o/ #'e credi#or. And in order#'a# an o*liga#ion ma *e e:#ing)is'ed * ano#'er 4'ic' s)*s#i#)#e #'e same- i# is impera#ive #'a# i# *e so declared in)ne()ivocal #erms- or #'a# #'e old and #'e ne4 o*liga#ions *e on ever poin# incompa#i*le 4i#' eac' o#'er. 0Ar#icle 1%-N.C.C.2 Nova#ion 4'ic' consis#s in s)*s#i#)#ing a ne4 de*#or in #'e place o/ #'e original one- ma *e made even 4i#'o)##'e 5no4ledge or agains# #'e 4ill o/ #'e la##er- *)# no# 4i#'o)# #'e consen# o/ #'e credi#or. Pamen# * #'e ne4 de*#orgives 'im #'e rig'#s men#ioned in Ar#icles 1& and 1&7.

In #'e case a# *ar- #'e )nder#a5ing o/ @essrs. Emilio A*ello and Pio Pedrosa #'a# #'e 4o)ld *) #'e s'ares o/ s#oc5 so #'a# P'ilamgen co)ld *e reim*)rsed /rom #'e proceeds #'a# i# paid #o Pr)den#ial Ban5 does no# necessaril impl#'e e:#ing)is'men# o/ #'e lia*ili# o/ pe#i#ioner !ope;. Since i# 4as no# es#a*lis'ed nor s'o4n #'a# !ope; 4o)ld *e released/rom responsi*ili#- #'e same does no# cons#i#)#e nova#ion and 'ence- P'ilamgen ma s#ill en/orce #'e o*liga#ion. As #'eCo)r# o/ Appeals correc#l 'eld #'a# 0#2'e represen#a#ion o/ @r. A*ello #o A##. S)ma4ang #'a# 'e and @r. Pedrosa 4o)ld*) #'e s#oc5s 4as a p)rel priva#e arrangemen# *e#4een #'em- no# an agreemen# *e#4een 0P'ilamgen2 and 0!ope;2 and4'ic' #'e Co)r# a=rms.

T'e promise o/ A*ello and Pedrosa #o *) #'e s'ares /rom priva#e responden# no# 'aving ma#eriali;ed 04'ic'promise 4as given #o said responden# onl and no# #o pe#i#ioner2 and no ac#ion 4as #a5en agains# #'e #4o * saidresponden# 4'o c'ose ins#ead #o s)e #'e pe#i#ioner on #'e Indemni# Agreemen#- i# is ()i#e clear #'a# #'is responden# 'asa*andoned i#s rig'# and in#eres# over #'e pledged proper#ies and m)s#- #'ere/ore- release or re#)rn #'e same #o #'epe#i#ionerpledgor )pon #'e la##erFs sa#is/ac#ion o/ 'is o*liga#ion )nder #'e Indemni# Agreemen#.

T'ere is no do)*le pamen# nor )n8)s# enric'men# in #'is case *eca)se #'e s'ares o/ s#oc5 4ere merel pledged.

ooOoo

PARAY vs. RODRIGUEZ

>ac#sResponden#s 4ere #'e o4ners- in #'eir respec#ive personal capaci#ies- o/ s'ares o/ s#oc5 in a corpora#ion 5no4n

as #'e L)irino!eonorRodrig)e; Real# Inc. Some#ime d)ring #'e ears 1%7% #o 1%+$- responden#s sec)red * 4a o/ pledge o/ some o/ #'eir s'ares o/ s#oc5 #o pe#i#ioners Boni/acio and >a)s#ina Para 0Paras2 #'e pamen# o/ cer#ain loan

o*liga#ions. W'en #'e Paras a##emp#ed #o /oreclose #'e pledges on acco)n# o/ responden#sM /ail)re #o pa #'eir loans-responden#s ?led complain#s 4i#' #'e Regional Trial Co)r# o/ Ce*) Ci#. T'e ac#ions- 4'ic' 4ere consolida#ed and #ried*e/ore RTC Branc' 13- Ce*) Ci#- so)g'# #'e declara#ion o/ n)lli# o/ #'e pledge agreemen#s- among o#'ers.

Ho4ever #'e RTC dismissed #'e complain# and gave d)e co)rse #o #'e /oreclos)re and sale a# p)*lic a)c#ion o/ #'e vario)s pledges s)*8ec# o/ #'ese #4o cases. T'is decision a##ained ?nali# a/#er i# 4as a=rmed * #'e Co)r# o/ Appealsand #'e S)preme Co)r#. Responden#s #'en received No#ices o/ Sale 4'ic' indica#ed #'a# #'e pledged s'ares 4ere #o *esold a# p)*lic a)c#ion. Ho4ever- *e/ore #'e sc'ed)led da#e o/ a)c#ionall o/ responden#s ca)sed #'e consigna#ion 4i#' #'eRTC Cler5 o/ Co)r# o/ vario)s amo)n#s. I# 4as claimed #'a# responden#s 'ad a##emp#ed #o #ender #'ese pamen#s #o #'eParas- *)# 'ad *een re*)6ed.

No#4i#'s#anding #'e consigna#ions- #'e p)*lic a)c#ion #oo5 place as sc'ed)led- 4i#' pe#i#ioner Vidal Espele#as)ccess/)ll *idding #'e amo)n# o/ P-$$-$$$.$$ /or all o/ #'e pledged s'ares. None o/ responden#s par#icipa#ed orappeared a# #'e a)c#ion. Responden#s ins#ead ?led a complain# see5ing #'e declara#ion o/ n)lli# o/ #'e concl)ded p)*lica)c#ion.




1$

Iss)eW'e#'er or no# pledged s'ares o/ s#oc5 a)c#ioned o6 in a no#arial sale co)ld s#ill *e redeemed * #'eir o4ners.

SC R)ling T'e s)*8ec# sale o/ pledged s'ares 4as an e:#ra8)dicial sale- speci?call a no#arial sale- as dis#ing)is'ed /rom a

8)dicial sale as #pi?ed * an e:ec)#ion sale. <nder #'e Civil Code- #'e /oreclos)re o/ a pledge occ)rs e:#ra8)diciall-4i#'o)# in#erven#ion * #'e co)r#s. All #'e credi#or needs #o do- i/ #'e credi# 'as no# *een sa#is?ed in d)e #ime- is #oproceed *e/ore a No#ar P)*lic #o #'e sale o/ #'e #'ing pledged.

T'e decision #o proceed 4i#' #'e sale * p)*lic a)c#ion remains in #'e sole discre#ion o/ #'e Paras- 4'o co)ldver 4ell c'oose no# #o 'old #'e sale 4i#'o)# viola#ing #'e ?nal 8)dgmen#s in #'e a/oremen#ioned civil cases. I/ #'e sale4ere #r)l in compliance 4i#' a ?nal 8)dgmen# or order- #'e Paras 4o)ld 'ave no c'oice *)# #o s#age #'e sale /or #'en #'eorder direc#ing #'e sale arises /rom 8)dicial comp)lsion. B)# no#'ing in #'e disposi#ive por#ion direc#ed #'e sale a# p)*lica)c#ion as a manda#or reco)rse- and properl so since #'e sale o/ pledged proper# in p)*lic a)c#ion is- * vir#)e o/ #'eCivil Code- e:#ra8)dicial in c'arac#er.

T'e rig'# #o redeem proper# sold as sec)ri# /or #'e sa#is/ac#ion o/ an )npaid o*liga#ion does no# e:is#pre#erna#)rall. Nei#'er is i# predica#ed on proprie#ar rig'#- 4'ic'- a/#er #'e sale o/ proper# on e:ec)#ion- leaves #'e

8)dgmen# de*#or and ves#s in #'e p)rc'aser. Ins#ead- i# is a *are s#a#)#or privilege #o *e e:ercised onl * #'e personsnamed in #'e s#a#)#e.

T'e rig'# o/ redemp#ion over mor#gaged real proper# sold e:#ra8)diciall is es#a*lis'ed * Ac# No. &1&,- as amended. T'esaid la4 does no# e:#end #'e same *ene?# #o personal proper#. In /ac#- #'ere is no la4 in o)r s#a#)#e *oo5s 4'ic' ves#s#'e rig'# o/ redemp#ion over personal proper#. Ac# No. 1,$+- or #'e C'a##el @or#gage !a4- os#ensi*l co)ld 'ave servedas #'e ve'icle /or an legisla#ive in#en# #o *es#o4 a rig'# o/ redemp#ion over personal proper#- since #'a# la4 governs #'ee:#ra8)dicial sale o/ mor#gaged personal proper#- *)# #'e s#a#)#e is de?ni#el silen# on #'e poin#. And Sec#ion &% o/ #'e1%%7 R)les o/ Civil Proced)re s#ar5l )##ers #'a# #'e rig'# o/ redemp#ion applies #o real proper#ies- no# personal proper#ies-

sold on e:ec)#ion.

<nder #'e Civil Code- i# is #'e pledgee- and no# #'e pledgor- 4'o is given #'e rig'# #o c'oose 4'ic' o/ #'e i#ems s'o)ld *esold i/ #4o or more #'ings are pledged. No similar op#ion is given #o pledgors )nder #'e Civil Code. @oreover- #'ere isno#'ing in #'e Civil Code provisions governing #'e e:#ra8)dicial sale o/ pledged proper#ies #'a# pro'i*i#s #'e pledgee o/ several di6eren# pledge con#rac#s /rom a)c#ioning all o/ #'e pledged proper#ies on a single occasion- or /rom #'e *)er a##'e a)c#ion sale in p)rc'asing all #'e pledged proper#ies 4i#' a single p)rc'ase price. T'e rela#ive insigni?cance o/ ascer#aining #'e de?ni#e appor#ionmen#s o/ #'e sale price #o #'e individ)al s'ares lies in #'e /ac# #'a# once a pledged i#emis sold a# a)c#ion- nei#'er #'e pledgee nor #'e pledgor can recover 4'a#ever de?cienc or e:cess #'ere ma *e *e#4een#'e p)rc'ase price and #'e amo)n# o/ #'e principal o*liga#ion.

T'ere is no do)*# #'a# i/ #'e principal o*liga#ion is sa#is?ed- #'e pledges s'o)ld *e #ermina#ed as 4ell. Ar#icle$%+ o/ #'e Civil Code provides #'a# #'e rig'# o/ #'e credi#or #o re#ain possession o/ #'e pledged i#em e:is#s onl )n#il #'ede*# is paid. Ar#icle 1$, o/ #'e Civil Code /)r#'er clari?es #'a# #'e de*#or canno# as5 /or #'e re#)rn o/ #'e #'ing pledgedagains# #'e 4ill o/ #'e credi#or- )nless and )n#il 'e 'as paid #'e de*# and i#s in#eres#. A# #'e same #ime- #'e rig'# o/ #'epledgee #o /oreclose #'e pledge is also es#a*lis'ed )nder #'e Civil Code. W'en #'e credi# 'as no# *een sa#is?ed in d)e#ime- #'e credi#or ma proceed 4i#' #'e sale * p)*lic a)c#ion )nder #'e proced)re provided )nder Ar#icle 11 o/ #'e

Code.

*. E6ec# i/ Credi# Pledged Becomes D)e- I/ #'e credi# pledged *ecomes d)e *e/ore redemp#ion. T'e pledgee ma collec# and

appl #'e amo)n# #o #'e credi# delivering #'e s)rpl)s #o #'e pledgor.

C. Considera#iona. As #o #'e de*#or

- I# is ei#'er li*erali# or 4i#' a s#ip)la#ed compensa#ion

*. As #o #'e pledge

- T'e considera#ion o/ #'e principal credi# s)ppor#s #'e pledge.

D. >orm- No par#ic)lar /orm is re()ired as *e#4een #'e par#ies- *)# #'e #'ing m)s# *e delivered

#o #'e credi#or or #o a s#ranger.

a. To a6ec# #'ird persons- T'ere m)s# *e a p)*lic ins#r)men# giving #'e descrip#ion o/ #'e #'ing pledged and

#'e da#e.

E6ec# o/ pledge in a p)*lic ins#r)men#

E<!O"IO BETITA vs. SI@EON "ANON- A!EJO DE !A >!OR- and C!E@ENTE PEDRENA

>ac#sThs act!n s "#!$%ht t! #&c!v&# th& '!ss&ss!n !( (!$# ca#a"a!s )th da*a%&s.

D&(&ndant A+&! d& +a F+!# #&c!v&#&d a $d%*&nt a%anst T"$#ca B$ha-an. Und&# ths $d%*&nt th& d&(&ndant Gan!n, as sh&#(( +&v&d &/&c$t!n !n th& ca#a"a!s n 0$&st!n )hch)&#& (!$nd n th& '!ss&ss!n !( !n& S*!n Jacnt! "$t #&%st&#&d n th& na*& !( T"$#caB$ha-an.




11

Th& '+ant((, E$+!%! B&tta, a th#d 'a#t- c+a* 1t&#c&#a2 a++&%&s that th& ca#a"a!s had "&&n *!#t%a%&d t! h* and as &vd&nc& th&#&!( '#&s&nt&d a d!c$*&nt, "$t th& sh&#(( '#!c&&d&d)th th& sa+& !( th& an*a+s at '$"+c a$ct!n )h&#& th&- )&#& '$#chas&d "- th& d&(&ndantC+&*&nt& P&#d&na, and ths act!n )as th&#&$'!n "#!$%ht.

Iss)eE6ec#s o/ pledge no# in a p)*lic ins#r)men#

SC R)ling@anresa- in commen#ing on ar#icle 1+,- sas

ART. 1+,. A pledge 4ill no# *e valid agains# a #'ird par# i/ #'e cer#ain# o/ #'e da#e is no# e:pressed in a p)*lic ins#r)men#.

Considering #'e e6ec#s o/ a con#rac# o/ pledge- i# is easil )nders#ood #'a#-4i#'o)# #'is 4arran# demanded * la4- #'e case ma 'appen 4'erein a de*#or in*ad /ai#' /rom #'e momen# #'a# 'e sees 'is mova*le proper# in danger o/ e:ec)#ion ma a##emp# #o 4i#'dra4 #'e same /rom #'e ac#ion o/ 8)s#ice and #'ereac' o/ 'is credi#ors * sim)la#ing- #'ro)g' criminal con/a*)la#ions- an#erior and

/ra)d)len# al#era#ions in 'is possession * means o/ /eigned con#rac#s o/ #'isna#)re9 and- 4i#' #'e o*8ec# o/ avoiding or preven#ing s)c' a*)ses- almos# all #'e/oreign 4ri#ers advise #'a#- /or #'e e6ec#iveness o/ #'e pledge- i# *e demanded as aprecise condi#ion #'a# in ever case #'e con#rac# *e e:ec)#ed in a p)*lic 4ri#ing-/or- o#'er4ise- #'e de#ermina#ion o/ i#s da#e 4ill *e rendered di=c)l# and i#s proo/ more so- even in cases in 4'ic' i# is e:ec)#ed *e/ore 4i#nesses- d)e #o #'edi=c)l# #o *e enco)n#ered in see5ing #'ose *e/ore 4'om i# 4as e:ec)#ed.

O)r code 'as no# gone so /ar- /or i# does no# demand in e:press #erms #'a# inall cases #'e pledge *e cons#i#)#ed or /ormali;ed in a p)*lic 4ri#ing- nor even inpriva#e doc)men#- *)# onl #'a# #'e cer#ain# o/ #'e da#e *e e:pressed in #'e ?rs#o/ #'e said class o/ ins#r)men#s in order #'a# i# ma *e valid agains# a #'ird par#9

and- in de/a)l# o/ an e:press provision o/ la4- in #'e cases 4'ere no agreemen#re()iring #'e e:ec)#ion in a p)*lic 4ri#ing e:is#s- i# s'o)ld *e s)*8ec#ed #o #'egeneral r)le- and especiall #o #'a# es#a*lis'ed in #'e las# paragrap' o/ ar#icle1+$- according #o 4'ic' all con#rac#s no# incl)ded in #'e /oregoing cases o/ #'esaid ar#icle s'o)ld *e made in 4ri#ing even #'o)g' i# *e priva#e- 4'enever #'eamo)n# o/ #'e presen#a#ion o/ one or o/ #'e #4o con#rac#ing par#ies e:ceeds 1-,$$pese#as. 0Vol. 1- ed.- p. 31.2

I/ #'e mere ?ling o/ a priva#e doc)men# 4i#' #'e s'eri6 a/#er #'e lev o/ e:ec)#ion can crea#e a lien o/ pledge s)perior #o #'e a##ac'men#- #'e p)rpose o/ #'e provisions o/ ar#icle 1+, as e:plained * @anresa clearl *e de/ea#ed.

>rom 4'a# 'as *een said i# /ollo4s #'a# #'e 8)dgmen# appealed /rom m)s# *ereversed and i# is ordered and ad8)dged #'a# #'e plain#i6 #a5e no#'ing * 'is ac#ion.Wi#'o)# cos#s. So ordered.

IV. ClassesA. Vol)n#ar

- Crea#ed * #'e 4ill o/ #'e par#iesB. !egal

- Crea#ed * opera#ion o/ la4

Ar#icles $%7 G 1&$I. E6ec#s as #o #'e pledgee

A. Rig'#s o/ #'e pledgee1. RETENTION O> THE THIN"

- #o re#ain #'e #'ing in 'is possession o/ in #'a# o/ #'e #'ird person #o 4'om i# 'as *eendelivered. <n#il #'e de*# is paid. Wi#' #'e corresponding o*liga#ion #o #a5e care o/ i# asa good /a#'er o/ a /amil.

a. <SE O> THE THIN"




1

- He ma )se #'e #'ing pledge onl i/ a)#'ori;ed or i/ i#s preserva#ion so re()ires.O#'er4ise- #'e pledgor ma as5 /or #'e deposi# o/ #'e #'ing.

b. DEPOSIT THE THIN"- T'e pledgee canno# deposi# #'e #'ing pledged 4i#' a #'ird person )nless so

a)#'ori;ed.2. REI@B<RSE@ENT

- To receive reim*)rsemen# /or #'e e:penses inc)rred /or #'e preserva#ion o/ #'e #'ingpledged.

3. CO@PENSATION O> >R<ITS WITH WHAT IS D<E THE CREDITOR- /r)i#s- income dividends or in#eres# earned or prod)ced * #'e #'ing pledged 4i#' #'ose

d)e #'e credi#or. i/ none are o4ing- or i/ #'ere is an e:cess #'e s'all *e applied #o #'e principal o/ #'e

de*#. o6springs o/ animals pledged *elong #o #'e pledgor *)# are s)*8ec# #o #'e pledge i/ #'ere

is no con#rar s#ip)la#ion.4. ACTIONS O> RECOVER AND DE>ENSE

- #'e credi#or ma ins#i#)#e or *ring ac#ions *elonging #o #'e o4ner in order #o de/endand recover #'e #'ing pledged.

5. PRE>ERENCE O> CREDIT- see Ar#. 31 no. 3 QQ

6. SA!E O> THE SEC<RIT"RO<NDSa. PRECA<TIONAR G i/- 4i#'o)# /a)l# o/ #'e pledgee- #'e #'ing r)ns #'e ris5 o/ des#r)c#ion-

impairmen# or dimin)#ion in val)e- 'e ma ca)se i# #o *e sold in p)*lic sale. <nless-#'e pledgor demand i#s re#)rn- o6ering ano#'er in i#s s#ead- o/ #'e same 5ind and no# o/ in/erior val)e. I/ sold- #'e price is s)*s#i#)#ed /or #'e sec)ri#.

b. >OREC!OS<RE i/ #'e credi# is no# paid in d)e #ime

@ODES O> >OREC!OS<REa. J<DICIA!b. ETRA J<DICIA!

Proced)re1. A# p)*lic a)c#ion 0#'e o4ner ma *id2. 4i#' no#ice #o #'e de*#or and pledgor- s#a#ing #'e amo)n# /or 4'ic' #'e #'ing 4ill

*e sold.&. #'e pledgor or o4ner ma *id a# #'e sale and m)s# *e pre/erred i/ 'e o6ers #'e

same as #'a# o/ #'e 'ig'es# *idder.3. #'e pledgee ma *id as 4ell- *)# 'is o6er is voed i/ 'e is #'e onl *idder.,. #'e *ids m)s# *e /or pamen# a# once- i/ a *id is accep#ed- i# opera#es as

pamen# #o #'e pledgee in so /ar as #'e de*#or or pledgor is concerned.. i/ a# #'e 1s# a)c#ion #'e #'ing is no# sold- and a second a)c#ion 4as cond)c#ed

and e# s#ill #'ere 4as no sale- #'e credi#or ma appropria#e #'e #'ing iss)ingac()i##ance in /)ll.c. R<!E I> TWO OR @ORE THIN"S ARE P!ED"ED

- I/ #4o or more #'ings are pledged- #'e pledgee ma c'oose 4'ic' 4ill *e sold-)nless #'e con#rar is s#ip)la#ed. B)# 'e can sell onl as man #'ings as are needed/or #'e pamen# o/ #'e de*#.

d. OPTIONS O> THE P!ED"EE- To collec# credi# pledged i/ #'e /all d)e *e/ore redemp#ion.

7. CO!!ECT CREDIT P!ED"ED- B)# 'e m)s# appl #'e proceeds #o #'e credi# and pa #'e s)rpl)s #o #'e pledgor.

B. O*liga#ions o/ #'e pledgee

1. Preserva#iona. degree o/ diligence- "ood /a#'er o/ a /amil and is lia*le /or i#s loss or de#eriora#ion. He m)s# no# )se

#'e #'ing pledged )nless a)#'ori;ed or i/ i#s preserva#ion so re()ires. O#'er4ise- #'epledgor ma as5 #'a# i# *e deposi#ed.

*. lia*ili# o/ ac#s o/ agen#sUemploees- Pledgor lia*le /or ac#s o/ i#s agen#s or emploees.

c. deposi# o/ #'e #'ing pledged- T'e pledgor canno# deposi# #'e #'ing pledged 4i#' a #'ird person- )nless #'ere is a

s#ip)la#ion a)#'ori;ing i#.d. in case o/ danger #o #'e #'ing pledged U danger o/ loss #'ro)g' negligence o/ pledge




1&

- I/ #'ro)g' #'e 4ill/)l ac#s or negligence o/ #'e pledgee- #'e #'ing is in danger o/ lossor impairmen#- #'e pledgor ma re()ire i#s deposi# 4i#' a #'ird person

e. in case o/ /ear o/ des#r)c#ion or impairmen# o/ #'e #'ing- I/ #'ere are reasona*le gro)nds #o /ear #'e des#r)c#ion or impairmen# o/ #'e #'ing

pledged 4i#'o)# #'e /a)l# o/ #'e pledgee #'e pledgor ma demand i#s re#)rn- )pono6ering ano#'er #'ing in pledge o/ #'e same 5ind and no# o/ in/erior ()ali#. <nless#'e pledgee ca)ses #'e same #o *e p)*licl sold.

. Res#i#)#iona. W'en

FILOMENA SARMIENTO and h&# h$s"and EUSEBIO M. 7ILLASE8OR vs. GLICERIOJA7ELLANA

Facts: D&(&ndant +!an&d th& '+ant((s th& s$* !( P9,;; )th nt&#&st at th& #at& !( < '&# c&nt '&# ann$* (!# th& t&#* !( !n& -&a#. T! %$a#ant&& ths +!an, th& '+ant((s '+&d%&d a +a#%& *&da+

)th a da*!nd n th& c&nt&# and s$##!$nd&d )th t&n da*!nds, a 'a# !( da*!nd &a##n%s, as*a++ c!*" )th t)&nt-=t)! da*!nds, and t)! da*!nd #n%s, )hch th& c!nt#actn% 'a#t&sa''#as&d at P>,;;;.

At th& *at$#t- !( ths +!an th& '+ant(( E$s&"! M. 7++as&?!#, )as $na"+& t! 'a- th& +!an, "$t h& )as a"+& t! !"tan (#!* th& d&(&ndant an &/t&ns!n, )th th& c!ndt!n that th& +!an )ast! c!ntn$&.

Da-s 'ast, th& '+ant(( E$s&"! M. 7++as&?!#, n c!*'an- )th Ca#+!s M. D#&-($s, )&nt t! th&h!$s& !( th& d&(&ndant and !((&#&d t! 'a- th& +!an and #&d&&* th& &)&+s, ta6n% )th h*, (!# ths '$#'!s&, th& s$* !( P99,;;;, "$t th& d&(&ndant th&n n(!#*&d th&* that th& t*& (!# th&

#&d&*'t!n had a+#&ad- &+a's&d.

Th& '+ant((s n!) "#n% ths act!n t! c!*'&+ th& d&(&ndant t! #&t$#n th& &)&+s '+&d%&d,!# th&# va+$&, $'!n th& 'a-*&nt "- th&* !( th& s$* th&- !)& th& d&(&ndant, )th th& nt&#&stth&#&!n.

Iss$&:3ON th& '+ant((s5 act!n (!# th& #&c!v&#- !( th& &)&+s '+&d%&d has '#&sc#"&d.

SC R$+n%:3th!$t d&cdn% )h&th&# !# n!t th& act!n t! #&c!v&# th& thn% '+&d%&d *a- '#&sc#"& n an-

cas&, t n!t "&n% n&c&ssa#- (!# th& '$#'!s&s !( ths !'n!n, "$t s$''!sn% that t *a-, st++ th&d&(&ndant5s c!nt&nt!n s $nt&na"+&. In th& d!c$*&nt &vd&ncn% th& +!an n 0$&st!n th&#& sstat&d:

@I t#ans(&# "- )a- !( '+&d%& th& (!++!)n% &)&+s.@ That ths s a va+d c!nt#act !( '+&d%& th&#&can "& n! 0$&st!n. As a *att&# !( (act th& d&(&ndant d!&s n!t 0$&st!n t, "$t ta6& s t (!# %#ant&d.

!)&v&#, t s c!nt&nd&d that th& !"+%at!n !( th& d&(&ndant t! #&t$#n th& &)&+s '+&d%&d *$st "& c!nsd&#&d as n!t stat&d n )#tn%, (!# ths !"+%at!n s n!t &/'#&ss+- *&nt!n&d n th&d!c$*&nt.

B$t ( ths c!nt#act !( '+&d%& s n )#tn%, t *$st n&c&ssa#+- "& ad*tt&d that th& act!n t!&n(!#c& th& #%ht, )hch c!nstt$t&s th& &ss&nc& !( ths c!nt#act, s c!v&#&d "- a )#tt&n c!nt#act.

Th& d$t- !( th& c#&dt!# t! #&t$#n th& thn% '+&d%&d n cas& th& '#nc'a+ !"+%at!n s ($+(++&d s&ss&nta+ n a++ c!nt#acts !( '+&d%&. Ths c!nstt$t&s, '#&cs&+-, th& c!nsd&#at!n !( th& d&"t!# nths acc&ss!#- c!nt#act, s! that ( ths !"+%at!n !( th& c#&dt!# t! #&t$#n t! thn% '+&d%&d, andth& #%ht !( th& d&"t!# t! d&*and th& #&t$#n th&#&!(, a#& &+*nat&d, th& c!nt#act )!$+d n!t "& ac!nt#act !( '+&d%&. It )!$+d "& a d!nat!n.




13

I( th& #%ht !( th& '+ant((s t! #&c!v&# th& thn% '+&d%&d s c!v&#&d "- a )#tt&n c!nt#act,th& t*& (!# th& '#&sc#'t!n !( ths act!n s t&n -&a#s, acc!#dn% t! s&ct!n > !( th& C!d& !( Cv+ P#!c&d$#&.

C!*'$tn% th& t*& (#!* that dat& t! that !( th& (+n% !( th& c!*'+ant n ths ca$s&,

Oct!"&# , 9<;, t a''&a#s that th& t&n -&a#s (/&d "- th& +a) (!# th& '#&sc#'t!n !( th& act!nhav& n!t -&t &+a's&d.

On th& !th&# hand, th& c!nt#act !( +!an )th '+&d%& s n )#tn% and th& act!n !( th&d&(&ndant (!# th& #&c!v&#- !( th& +!an d!&s n!t '#&sc#"& $nt+ a(t&# t&n -&a#s. It s $n$st t! h!+dthat th& act!n !( th& '+ant((s (!# th& #&c!v&#- !( th& thn% '+&d%&d, a(t&# th& 'a-*&nt !( th&+!an, has a+#&ad- '#&sc#"&d )h+& th& act!n !( th& d&(&ndant (!# th& #&c!v&#- !( th& +!an hasn!t -&t '#&sc#"&d. Th& #&s$+t !( ths )!$+d "& that th& d&(&ndant *%ht hav& c!++&ct&d th& +!anand at th& sa*& t*& 6&'t th& thn% '+&d%&d.

Th& *!t!n (!# #&c!nsd&#at!n s d&n&d.

*. E6ec# o/ re#)rn o/ #'e #'ing #o pledgor- T'e re#)rn o/ #'e #'ing pledged #o #'e pledgor or o4ner e:#ing)is'es #'e pledge

0NOT THE PRINCIPA! OB!I"ATION21. E6ec# o/ con#rar s#ip)la#ion

- A s#ip)la#ion #o #'e con#rar is VOED2. Pres)mp#ion i/ #'ing is in possession o/ #'e pledgor

- I/ s)*se()en# #o #'e per/ec#ion o/ #'e pledge- #'e pledgor or ano#'er person 4'oderives #i#le /rom 'im is in possession o/ #'e #'ing pledged- i# is pres)med prima/acie #'a# #'e pledgee re#)rned i#.

II. E6ec#s as #o #'e pledgorA. Rig'#s o/ #'e pledgor

a. Remains #'e o4ner G #'e pledgor remains #'e o4ner o/ #'e #'ing pledged- )n#il i#s sale-)nless #'e #'ing is e:propria#ed.0Ar#. 1$&. <nless #'e #'ing pledged is e:propria#ed- #'e de*#or con#in)es #o *e #'e

o4ner #'ereo/.Never#'eless- #'e credi#or ma *ring #'e ac#ions 4'ic' per#ain #o #'e o4ner o/ #'e#'ing pledged in order #o recover i# /rom- or de/end i# agains# a #'ird person.2

b. @a demand deposi# o/ #'e #'ing G He ma demand #'e deposi# o/ #'e #'ing i/ endangered * /a)l# or negligence o/ #'e pledgee or )sed * #'e pledgee.0Ar#. 1$. I/ #'ro)g' #'e negligence or 4il/)l ac# o/ #'e pledgee- #'e #'ing pledged is indanger o/ *eing los# or impaired- #'e pledgor ma re()ire #'a# i# *e deposi#ed 4i#' a

#'ird person.20Ar#. 1$3. T'e credi#or canno# )se #'e #'ing pledged- 4i#'o)# #'e a)#'ori# o/ #'eo4ner- and i/ 'e s'o)ld do so- or s'o)ld mis)se #'e #'ing in an o#'er 4a- #'e o4nerma as5 #'a# i# *e 8)diciall or e:#ra8)diciall deposi#ed. W'en #'e preserva#ion o/ #'e#'ing pledged re()ires i#s )se- i# m)s# *e )sed * #'e credi#or *)# onl /or #'a#p)rpose.2

c. @a s)*s#i#)#e ano#'er #'ing G He ma s)*s#i#)#e ano#'er #'ing i/ endangered 4i#'o)##'e /a)l# o/ pledgeeprovided i# is o/ #'e same 5ind and no# o/ in/erior ()ali#.0Ar#. 1$7. I/ #'ere are reasona*le gro)nds #o /ear #'e des#r)c#ion or impairmen# o/ #'e#'ing pledged- 4i#'o)# #'e /a)l# o/ #'e pledgee- #'e pledgor ma demand #'e re#)rn o/ #'e #'ing- )pon o6ering ano#'er #'ing in pledge- provided #'e la##er is o/ #'e same 5indas #'e /ormer and no# o/ in/erior ()ali#- and 4i#'o)# pre8)dice #o #'e rig'# o/ #'e

pledgee )nder #'e provisions o/ #'e /ollo4ing ar#icle.2d. To *id and #o pre/erence a# /oreclos)re sale G T'e pledgor is en#i#led #o *id and #o

pre/erence a# #'e /oreclos)re sale.0Ar#. 11&. A# #'e p)*lic a)c#ion- #'e pledgor or o4ner ma *id. He s'all- moreover-'ave a *e##er rig'# i/ 'e s'o)ld o6er #'e same #erms as #'e 'ig'es# *idder.2

e. To re#)rn o/ #'e #'ing G He 'as #'e rig'# #o #'e re#)rn o/ #'e #'ing pledged )pone:#inc#ion o/ #'e principal o*liga#ion.0Ar#. $%+. T'e con#rac# o/ pledge gives a rig'# #o #'e credi#or #o re#ain #'e #'ing in 'ispossession or in #'a# o/ a #'ird person #o 4'om i# 'as *een delivered- )n#il #'e de*# ispaid.2




1,

A G 1. Rig'#s o/ pledgor 4'o is no# #'e principal de*#or- I/ #'e pledgor is no# #'e principal de*#or- 'e 'as #'e same rig'#s as a g)aran#or )nder

Ar#.s $7$ 0reim*)rsemen#- s)*roga#ion2 and $77 #o $+1 0release * nova#ion-e:#ension- impossi*ili# o/ s)*roga#ion and )se o/ de/enses o/ #'e principal de*#or2.B)# 'e is no# en#i#led #o #'e *ene?# o/ e:'a)s#ion.

So)#'ern @o#ors- Inc. vs Bar*osa- s)pra

SC R)ling T'e rig'# o/ g)aran#ors- )nder Ar#icle $,+ o/ #'e Civil Code o/ #'e P'ilippines- #odemand e:'a)s#ion o/ #'e proper# o/ #'e principal de*#or- e:is#s onl 4'en apledge or a mor#gage 'as no# *een given as special sec)ri# /or #'e pamen# o/ #'eprincipal o*liga#ion. ")aran#ees- 4i#'o)# an s)c' pledge or mor#gage- aregoverned * Ti#le V o/ said Code- 4'ereas pledges and mor#gages /all )nder Ti#leVI o/ #'e same Code- in 4'ic' #'e /ollo4ing provisions- among o#'ers- are /o)nd

ART. $+7. I# is also o/ #'e essence o/ #'ese con#rac#s #'a# 4'en #'e principalo*liga#ion *ecomes d)e- #'e #'ings in 4'ic' #'e pledge or mor#gage consis#s ma*e aliena#ed /or #'e pamen# #o #'e credi#or.

ART. 1. T'e mor#gage direc#l and immedia#el s)*8ec#s #'e proper# )pon4'ic' i# is imposed- 4'oever #'e possessor ma *e- #o #'e /)l?llmen# o/ #'eo*liga#ion /or 4'ose sec)ri# i# 4as cons#i#)#ed.

I# 'as *een 'eld alread 0Saavedra vs. Price- + P'il.- ++2- #'a# a mor#gagor is no#en#i#led #o #'e e:'a)s#ion o/ #'e proper# o/ #'e principal de*#or.

Al#'o)g' an ordinar personal g)aran#or no# a mor#gagor or pledgor ma

demand #'e a/oremen#ioned e:'a)s#ion- #'e credi#or ma- prior #'ere#o- sec)re a 8)dgmen# agains# said g)aran#or- 4'o s'all *e en#i#led- 'o4ever- #o a de/ermen# o/ #'e e:ec)#ion o/ said 8)dgmen# agains# 'im )n#il a/#er #'e proper#ies o/ #'eprincipal de*#or s'all 'ave *een e:'a)s#ed #o sa#is/ #'e o*liga#ion involved in #'ecase.

B. O*liga#ions o/ #'e pledgora. To no#i/ #'e pledgee o/ a4s G He m)s# no#i/ #'e pledgee o/ a4s o/ #'e #'ing 5no4n

#o 'im9 o#'er4ise 'e ans4ers /or damages li5e #'e *ailor 0*orro4er2 in commoda#)m.0Ar#. 1$1. T'e pledgor 'as #'e same responsi*ili# as a *ailor in commoda#)m in #'ecase )nder Ar#icle 1%,1.2

III. E:#ing)is'men# o/ #'e pledgeA. E:#inc#ion o/ #'e principal o*liga#ionB. B des#r)c#ion or loss o/ #'e #'ing pledged 0in #'e possession o/ #'e pledgee2C. B re#)rn o/ #'e pledgeD. B ren)ncia#ion * #'e pledgee or a*andonmen# o/ #'e pledge in 4ri#ing even 4i#'o)#

re#)rn- or consen# o/ #'e pledgor 0*ecomes deposi#ar2E. B redemp#ion o/ #'e par# 'aving an rig'# in or #o #'e #'ing pledged 0Ar#. 117. An #'ird

person 4'o 'as an rig'# in or #o #'e #'ing pledged ma sa#is/ #'e principal o*liga#ion assoon as #'e la##er *ecomes d)e and demanda*le.2

F. B o#'er ca)ses o/ e:#ing)is'men# o/ ordinar o*liga#ions

Ar#icles 11 G 1!egal Pledges 0Rig'# o/ Re#en#ion2A. "overning r)les G T'ese pledges are governed * #'e r)les o/ conven#ional pledge as #o

a. Possesssion9*. Care and preserva#ion9c. Sale o/ #'e #'ing pledged

1. T'e sale ma *e made onl a/#er demand o/ #'e s)m d)e. Wi#'in one mon#' a/#er s)c' demand

i. I/ no sale #a5es place 4i#'in s)c' period- #'e de*#or ma re()ire #'e re#)rn o/ #'e#'ing re#ained- )nless dela is 8)s#i?ed




1

&. T'e e:cess o/ #'e price over #'e de*# @<ST *e re#)rned #o #'e de*#or

B. Cases o/ re#en#ion G E:amples o/ legal pledgesa. Possessor in good /ai#' /or necessar and )se/)l e:penses 0ar#. ,32*. T'e )s)/r)c#)ar /or #a:es and e:#raordinar e:penses 0ar#. 12c. T'e agen#- /or e:penses advanced and damages ca)sed * #'e agenc 0ar#. 1%132d. T'e person 4'o e:ec)#es 4or5 on a mova*le /or #'e pamen# #'ereo/ 0mec'anics lien2.

0ar#. 17&12e. T'e deposi#ar- /or e:penses * reason o/ #'e deposi# 0ar#. 1%%32/. T'e 'o#el 5eeper /or credi#s /or lodging and s)pplies /)rnis'ed #o #ravelers. 0ar#. $$32

Ar#icles 1&!a4sUR)les governing pa4ns'opsAr#. 1&. Wi#' regard #o pa4ns'ops and o#'er es#a*lis'men#s- 4'ic' are engaged in ma5ingloans sec)red * pledges- #'e special la4s and reg)la#ions concerning #'em s'all *e o*served-and s)*sidiaril- #'e provisions o/ #'is Ti#le.

ooOoo

REA! ESTATE @ORT"A"E

Ar#icles 13 G 1&1I. Concep#

A. As a rig'#- I# is a real rig'# over immova*les cons#i#)#ed * #'e o4ner #o g)aran#ee an o*liga#ion

4'ic' i/ no# paid is #o *e sa#is?ed /rom #'e proceeds o/ #'e sale o/ s)c' proper#.

B. As a con#rac#- I# is a con#rac# 4'ere* #'e de*#or g)aran#ees #'e per/ormance o/ a principal

o*liga#ion s)*8ec#ing as sec)ri# #'ere/or real proper#ies or real rig'#s in case s)c'o*liga#ion is no# complied 4i#'- 4i#'in #'e #ime s#ip)la#ed.

II. Elemen#sA. Par#ies

a. T'e mor#gagor 04'o need no# *e #'e principal de*#or2 m)s# 'ave /ree disposal and *e#'e a*sol)#e o4ner o/ #'e sec)ri#9 o#'er4ise 'e m)s# *e properl a)#'ori;ed.1. W'ere a mor#gage is a n)lli#- 'aving *een e:ec)#ed * an )na)#'ori;ed person-

regis#ra#ion )nder #'e !and Regis#ra#ion Ac# 4ill no# valida#e i# 0'o4 *o)# #'e

mor#gagee in good /ai#' doc#rine *)lls'i# c')vaK I #'in5 depende ra sa si#)a#ion andsa par#ies involved on #'e /)c5ing degree o/ diligence re()ired. AlienK A!IEN2b. T'e mor#gagee m)s# 'ave capaci# #o con#rac#.

B. O*8ec# G 4'ic' ma onl *ea. Immova*lesb. Aliena*le real rig'#s imposed )pon immova*les in accordance 4i#' #'e la4

C. Considera#ion G same as pledge. 0morag 5a#ong same ca)se as #'e principal o*liga#ionc')va- maa maa na ang #rend 5aron- pag mao namo mga *ae####2

D. >orm G /or validi# 0Ar#. 1,2

a. Be#4een #'e par#ies G1. <nder #'e Real Es#a#e 0Spanis' Sardines2 @or#gage !a4 G To *e legall crea#ed in avalid manner i# is necessar #'a# #'e mor#gage *e cons#i#)#ed * a p)*licins#r)men#.

2. . <nder #'e !and Regis#ra#ion Ac# G @or#gages 4'e#'er regis#ered or )nregis#ereds'all *e s)=cien# in la4 and s'all *e e6ec#ive #o enc)m*er lands provided #'a#ever s)c' ins#r)men# s'all *e signed * #'e person e:ec)#ing #'e same- in #'epresence o/ #4o 4i#nesses- and s'all *e ac5no4ledged #o *e 'is /ree ac# and deed*e/ore #'e 8)dge o/ a co)r# o/ record or cler5 o/ a co)r# o/ record or a no#ar p)*licor a 8)s#ice o/ peace 4'o s'all cer#i/ #o s)c' ac5no4ledgemen# 0Sec. 17- Ac# No.3%2 0c'ec5 PD 1,%2




17

E6ec# o/ <nregis#ered @or#gage Be#4een #'e Par#iesIn order #'a# a mor#gage ma *e validl cons#i#)#ed- #'e doc)men# m)s# *e recorded in#'e regis#r o/ peroper#. I/ no# so recorded- #'e mor#gage is never#'eless *inding *e#4een#'e par#ies. As *e#4een #'e par#ies- #'e mere /ac# #'a# #'ere is as e# no compliance 4i#'#'e re()iremen# #'a# i# *e recorded canno# *e a *ar #o /oreclos)re.

@o*il Oil P'il. Inc. vs Diocares% SCRA ,- Sep#. &$- 1%%

>ac#sPlain#i6 @OBI! e:#ended a P3,-$$$ loan #o de/endan# Diocares paa*le in mon#'lins#allmen#s and sec)red * a ?rs# mor#gage on parcels o/ land. T'e de/endan#also agreed #o *) /rom #'e plain#i6 #'eir pe#role)m re()iremen#s in an amo)n# no#less #'an ,$-$$$ li#ers per mon#'. I# 4as /)r#'er agreed #'a# in case o/ de/endan#Ms/ail)re #o pa an ins#allmen# d)e and p)rc'ase a minim)m o/ ,$-$$$ li#ers permon#' o/ pe#role)m- #'e plain#i6 'as #'e rig'# #o /oreclose #'e mor#gage or recover

pamen# o/ #'e en#ire o*liga#ion. T'e de/endan# paid onl P1-%$1 and /ailed #o *)on cas' *asis #'e agreed minim)m amo)n# o/ pe#role)m.

Plain#i6 ?led an ac#ion /or pamen# o/ #'e *alance o/ #'e de*# and in de/a)l# o/ s)c' pamen#- mor#gaged proper# *e sold and proceeds applied #o de/endan#Mso*liga#ion. T'e lo4er co)r# ordered #'e de/endan# #o pa #'e plain#i6 saido*liga#ion *)# did no# order /oreclos)re o/ #'e mor#gage )pon #'e gro)nd #'a# i#does no# appear /rom #'e cop o/ #'e loan and real es#a#e mor#gage #'a# saidmor#gage 'ad *een regis#ered and #'ere/ore- #'e loan agreemen# al#'o)g' *indingamong #'e par#ies merel crea#ed a personal o*liga#ion *)# did no# es#a*lis' a reales#a#e mor#gage. Plain#i6 appealed.

Iss)eW'e#'er or no# a real es#a#e mor#gage 4as crea#ed.

SC R)lingAr#. 1, o/ #'e Ne4 Civil Code provides In addi#ion #o #'e re()isi#es s#a#ed inar#icle $+,- i# is indispensa*le- in order #'a# a mor#gage ma *e validlcons#i#)#ed- #'a# #'e doc)men# in 4'ic' i# appears *e recorded in #'e Regis#r o/ Proper#. I/ #'e ins#r)men# is no# recorded- #'e mor#gage is never#'eless *inding*e#4een #'e par#ies.

T'e lo4er co)r# regarded #'e ca#egorical na#)re o/ i# is indispensa*le *)# ignored#'e s)cceeding sen#ence #'e mor#gage is never#'eless *inding )pon #'e par#ies.

T'e la4 is clear. T'e @or#gage s)*sis#s. As *e#4een #'e par#ies- #'e mere /ac# #'a##'ere is as e# no compliance 4i#' #'e re()iremen# #'a# i# *e recorded canno# *e a*ar #o /oreclos)re. No in#erpre#a#ion o/ #'e la4 is needed- onl i#s applica#ion.

In #'e lang)age o/ #'e Repor# o/ #'e Code commission in Ar#. 1, an addi#ionalprovision is made #'a# i/ #'e ins#r)men# o/ mor#gage is no# recorded- #'e mor#gageis never#'eless *inding *e#4een #'e par#ies. T'is is indica#ive o/ #'e legisla#ivein#en#.

@oreover- e()i# so demands and 8)s#ice is served. T'ere is #')s a /)llac5no4ledgemen# o/ #'e *inding e6ec# o/ a promise- 4'ic' m)s# *e lived )p #o. I#co)ld *e said #'a# #o allo4 /oreclos)re in #'e a*sence o/ s)c' a /ormali# is #o

o6end agains# #'e demands o/ 8)ral smme#r. W'a# is indispensa*le ma *edispensed 4i#'. S)c' an o*8ec#ion is /ar /rom /a#al. T'is 4o)ld no# *e #'e ?rs# #ime4'en logic ields #o 4'a# is /air and 4'a# is 8)s#. To s)c' an overmas#eringre()iremen#- la4 is no# imm)ne.Order a=rmed 4i#' modi?ca#ions.

b. As #o s#rangers G #'e doc)men# in 4'ic' #'e mor#gage appears m)s# *e recorded in #'eRegis#r o/ Proper# o/ #'e province 4'ere #'e land is loca#ed.

Validi# o/ Priva#e Doc)men# evidencing mor#gage




1+

No valid mor#gage 'as *een cons#i#)#ed in plain#i6Ms /avor- #'e alleged deed o/ mor#gage*eing a mere priva#e doc)men# and no# regis#ered9 moreover- i# con#ains a s#ip)la#ion0pac#o comisorio2 4'ic' is n)ll and void )nder Ar#. $++ o/ #'e Civil Code.

Hec'anova vs. Adil

"R !3%%3$- Sep#. ,- 1%+

>ac#s T'e case )nder revie4 is /or #'e ann)lmen# o/ a deed o/ sale da#ed @arc' 11- 1%7+-e:ec)#ed * de/endan# Jose . Servando in /avor o/ 'is code/endan#s- #'epe#i#ioners 'erein- covering #'ree parcels o/ land si#)a#ed in Iloilo Ci#. Claiming#'a# #'e said parcels o/ land 4ere mor#gaged #o 'im in 1%7$ * #'e vendor- 4'o is'is co)sin- #o sec)re a loan o/ P$-$$$.$$- #'e plain#i6 Pio Servando imp)gned #'evalidi# o/ #'e sale as *eing /ra)d)len#- and praed #'a# i# *e declared n)ll and voidand #'e #rans/er cer#i?ca#es o/ #i#le iss)ed #o #'e vendees *e cancelled- oral#erna#ivel- i/ #'e sale is no# ann)lled- #o order #'e de/endan# Jose Servando #opa #'e amo)n# o/ P$-$$$.$$- pl)s in#eres#s- and #o order de/endan#s #o pa

damages. A##ac'ed #o #'e complain# 4as a cop o/ #'e priva#e doc)men#evidencing #'e alleged mor#gage 0Anne: A2- 4'ic' is ()o#ed 'ere)nder

A)g)s# $- 1%7$ T'is is #o cer#i/ #'a# I- Jose )sa Servando- #'e sole o4ner o/ #'ree parcel o/ land)nder Ta: Declara#ion No. +%$,- 331& and &1,%1 a# !o# No. 1- 1+&Por#ion o/ 1+& 1+$ si#)a#ed a# S#o. Nino S#.- Arevalo- Compania S#. Compania S#.-In#erior @olo- respec#ivel- 'ave #'is da#e mor#gaged #'e said proper# #o mco)sin Pio Servando- in #'e amo)n# o/ TWENT THO<SAND PESOS 0P$-$$$.$$2-redeema*le /or a period no# e:ceeding #en 01$2 ears- #'e mor#gage amo)n#*earing an in#eres# o/ 1$ per ann)m.

I /)r#'er cer#i/ #'a# in case I /ail #o redeem #'e said proper#ies 4i#'in #'e periods#a#ed a*ove- m co)sin Pio Servando- s'all *ecome #'e sole o4ner #'ereo/.0S"D.2 JOSE <SA SERVANDOWITNESSES0Sgd2 Ernes#o ". Jer)#a0Sgd2 >rancisco B. Villan)eva

SC R)lingI# is clear /rom #'e records o/ #'is case #'a# #'e plain#i6 'as no ca)se o/ ac#ion.Plain#i6 'as no s#anding #o ()es#ion #'e validi# o/ #'e deed o/ sale e:ec)#ed * #'edeceased de/endan# Jose Servando in /avor o/ 'is code/endan#s Hec'anova and@asa. No valid mor#gage 'as *een cons#i#)#ed plain#i6Fs /avor- #'e alleged deed o/

mor#gage *eing a mere priva#e doc)men# and no# regis#ered9 moreover- i# con#ainsa s#ip)la#ion 0pac#o comisorio2 4'ic' is n)ll and void )nder Ar#icle $++ o/ #'e CivilCode. Even ass)ming #'a# #'e proper# 4as validl mor#gaged #o #'e plain#i6- 'isreco)rse 4as #o /oreclose #'e mor#gage- no# #o see5 ann)lmen# o/ #'e sale.

T'e complain# ?led * plain#i6 da#ed >e*r)ar 3- 1%7+ is 'ere* dismissed.

E. S)pplemen#ar la4 G #'e Real Es#a#e @or#gage !a4 o/ 1++% 0!e Hipo#ecaria de >ilipinas2and #'e !and Regis#ra#ion Ac# 0Ac#. No. 3%2- and also #'e Proper# Regis#ra#ion Decree 0PD1,%2

III. ClassesA. Vol)n#ar G one 4'ic' is agreed #o *e#4een #'e par#ies or cons#i#)#ed * #'e 4ill o/ #'e

o4ner o/ #'e proper# on 4'ic' i# is crea#ed. 0Con#rac#)al @or#gage2B. !egal G one re()ired * la4 #o *e e:ec)#ed in /avor o/ cer#ain persons.C. E()i#a*le @or#gage G one 4'ic'- al#'o)g' i# lac5s #'e proper /ormali#ies o/ a mor#gage

re()ired * la4 never#'eless s'o4s #'e in#en#ion o/ #'e par#ies #o *)rden #'e proper# asa sec)ri# /or a de*#.

IV. E6ec#sA. As #o #'e proper# mor#gaged

a. Crea#ion o/ real rig'#




1%

- A regis#ered mor#gage crea#es rig'# in rem- a real rig'#- a lien insepara*le /rom #'eproper# mor#gaged- 4'ic' is en/orcea*le agains# #'e 4'ole 4orld- a6ordingspeci?c sec)ri# /or #'e sa#is/ac#ion o/ a de*#. T'e personali# o/ #'e o4ner isdisregarded. <n#il disc'arged )pon pamen# o/ #'e o*liga#ion- i# /ollo4s #'e proper#4'erever i# goes and s)*sis#s no#4i#'s#anding c'anges o/ o4ners'ip.

Cancella#ion o/ mor#gage in lie) o/ s)re# *ond

"an;on vs. Inser#o".R. No. !,3,$ J)l ,- 1%+&

>ac#sPe#i#ioner "an;on ini#ia#ed proceedings #o e:#ra8)diciall /oreclose a real es#a#emor#gage e:ec)#ed * #'e priva#e responden#s in 'is /avor. T'e Deed o/ Real Es#a#e@or#gage e:ec)#ed *e#4een Randolp' Ta8anlangi# and Es#e*an Ta8anlangi# asmor#gagors on one 'and and Rodol/o "an;on as mor#gagee on #'e o#'er 'and 4as#o sec)re #'e pamen# * #'e Ta8anlangi#s o/ a promissor no#e amo)n#ing #o

P3$-$$$.$$ in /avor o/ "an;on.

A da *e/ore *e/ore #'e sc'ed)led p)*lic a)c#ion- priva#e responden#s ?led a civilac#ion /or speci?c per/ormance- damages- and p'o*i#ion 4i#' preliminar in8)nc#ionagains# #'e pe#i#ioners 4i#' #'e resaponden# co)r#.

T'e #rial co)r# ordered #'e cancella#ion o/ a mor#gage lien anno#a#ed in TorrensCer#i?ca#e o/ Ti#le #o sec)re #'e pamen# o/ a promissor no#e and s)*s#i#)#)#es)c' mor#age lien 4i#' a s)re# *ond approved * #'e same co)r# #o sec)re #'epamen# o/ #'e promissor no#e.

Iss)e

@a #'e responden# co)r# order #'a# a mor#gage on real proper# *e s)*s#i#)#ed *a s)re# *ond and direc# #'e Regis#er o/ Deeds #o cancel #'e mor#gage lienanno#a#ed on #'e Torrens Ti#le since #'e s)re# *ond alread sec)res #'e o*liga#ionearlier sec)red * #'e cancelled mor#gageK

SC R)ling NO. A''+-n% th& '#nc'+&s $nd&#+-n% th& nat$#& !( a *!#t%a%&, th& #&a+ &stat& *!#t%a%& cann!t "& s$"stt$t&d "- a s$#&t- "!nd as !#d&#&d "- th& t#a+ c!$#t. Th& *!#t%a%& +&n n (av!# !( P&tt!n&# R!d!+(! Gan!n s ns&'a#a"+& (#!* th& *!#t%a%&d '#!'&#t-. It s a #%ht n #&*, a +&n!n th& '#!'&#t-. T! s$"stt$t& th& *!#t%a%& )th a s$#&t- "!nd )!$+d c!nv&#t s$ch +&n (#!* a#%ht n #&*, t! a #%ht n '&#s!na*. Ths c!nv&#s!n can n!t "& !#d&#&d (!# t )!$+d a"#d%& th&#%hts !( th& *!#t%a%&& $nd&# th& *!#t%a%& c!nt#act.

E6ec# o/ sale o/ mor#gaged proper#

Bonnevie vs. CAG.R. N!. L=>9;9 Oct!"&# <>, 9

Facts:I# is no# disp)#ed #'a# spo)ses !o;ano 4ere #'e o4ners o/ #'e proper# 4'ic' #'emor#gaged on Decem*er - 1%- #o sec)re #'e pamen# o/ #'e loan o/ P7,-$$$.$$#'e 4ere a*o)# #o o*#ain /rom de/endan# P'ilippine Ban5 o/ Commerce9 #'a# on

Decem*er +- 1%- #'e e:ec)#ed in /avor o/ plain#i6 Hones#o Bonnevie #'e Deedo/ Sale 4i#' Ass)mp#ion o/ @or#gage- /or an in considera#ion o/ #'e s)m o/ P1$$-$$$.$$- P,-$$$ o/ 4'ic' amo)n# *eing paa*le #o #'e !o;ano spo)ses )pon#'e e:ec)#ion o/ #'e doc)men#- and #'e *alance o/ P7,-$$$ *eing paa*le #ode/endan# *an5.

De/endan# applied /or #'e /orclos)re o/ #'e mor#gage. Pe#i#ioners so)g'# #'eann)lmen# o/ #'e Deed o/ @or#gage and alleged among o#'ers #'a# #'e mor#gage4as e:ec)#ed * one 4'o 4as no# #'e o4ner o/ #'e mor#gaged proper#.

Iss)e




$

W'e#'er #'e real es#a#e mor#gage e:ec)#ed * #'e spo)ses !o;ano in /avor o/ responden# *an5 4as validl and legall e:ec)#ed.

SC R)ling ES. Pe#i#ioners admi# #'a# #'e did no# sec)re #'e consen# o/ responden# Ban5 #o#'e sale 4i#' ass)mp#ion o/ mor#gage. Co)pled 4i#' #'e /ac# #'a# #'esaleUassignmen# 4as no# regis#ered so #'a# #'e #i#le remained in #'e name o/ #'e!o;ano spo)ses- inso/ar as responden# Ban5 4as concerned- #'e !o;ano spo)sesco)ld rig'#/)ll and validl mor#gage #'e proper#. Responden# *an5 'ad everrig'# #o rel on #'e cer#i?ca#e o/ #i#le. I# 4as no# *o)nd #o go *e'ind #'e same #oloo5 /or a4s in #'e mor#gagorMs #i#le- #'e doc#rine o/ innocen# p)rc'aser /or val)e*eing applica*le #o an innocen# p)rc'aser /or val)e.

A mor#gage /ollo4s #'e proper# 4'oever #'e possesor ma *e and s)*8ec#s #'e/)l?llmen# o/ #'e o*liga#ion /or 4'ose sec)ri# i# 4as cons#i#)#ed.

E6ec# o/ dea#' o/ mor#gagor

Jaco* vs. CA1+3 SCRA %39 April - 1%%$

>ac#sPe#i#ioner con#ends #'a# #'e e:#ra8)dicial /oreclos)re proceedings and #'e sale o/ #'e proper# mor#gaged )nder #'e amended real es#a#e mor#gage a/#er #'emor#gagor died are n)ll and void. I# is poin#ed o)# #'a# Dr. Jaco* died on @arc' %-1%7% and #'a# #'e e:#ra8)dicial /orecl)s)re proceedings 4ere e6ec#ed a/#er 'isdea#'- #'a# is- #'e p)*lic a)c#ion sale 4as made on @a 11- 1%7%. Pe#i#ioner arg)es#'a# s)c' e:#ra8)dicial /oreclos)re can onl *e prosec)#ed d)ring #'e li/e#ime o/ Dr.

Jaco* /or #'e reason #'a# s)c' 5ind o/ /orclos)re )nder Ac# No. &1&,- as amended-is a)#'ori;ed onl *eca)se o/ #'e special po4er /o a##orne inser#ed in #'emor#gage deed9 and #'a# said special po4er o/ a##orne canno# e:#end *eond #'eli/e#ime o/ #'e s)pposed mor#gagor.

Iss)eW'e#'er or no# an e:#ra8)dicial /oreclos)re o/ a mor#gage ma proceed even a/#er#'e dea#' o/ #'e mor#gagor.

SC R)ling ES. T'e po4er #o /oreclose a mor#gage is no# an ordinar agenc #'a#con#empla#ed e:cl)sivel #'e represen#a#ion o/ #'e principal * #'e agen# *)# is

primaril an a)#'ori# con/erred )pon #'e mor#gagee /or #'e la##erMs o4npro#ec#ion. T'a# po4er s)rvives #'e dea#' o/ #'e mor#gagor. T'e rig'# o/ #'emor#gagee *an5 #o e:#ra8)diciall /oreclose #'e mor#gage a/#er #'e dea#' o/ #'emor#gagor- ac#ing #'ro)g' 'is a##ornein/ac#- did no# depend on #'e a)#'ori# in#'e deed o/ mor#gage e:ec)#ed * #'e la##er.

*. E:#ension #o accesions and accessoriesE6ec# o/ mor#gage o/ 'aciendaU4'ere mor#gagee #rans/erred 'is credi#

Bisc'o6 vs. Pomar

1 P'il %$9 >e*r)ar - 1%$%

>ac#sIn J)l 1%$$- !a;aro @o#a loaned #o Romana "an;on P11- $% paa*le in earsand sec)red * a mor#gage consis#ing o/ 'acienda San Jose. Addi#ional loans 4eregran#ed 4i#' /)r#'er s#ip)la#ions #'a# in case o/ de*#orMs /ail)re #o pa #'e credi#or-#'e mor#gaged 'acienda 4o)ld *e disposed o/ a# p)*lic a)c#ion #o sa#is/ #'e saidinde*#edness. T'is las# ins#r)men# 4as en#ered in #'e regis#r o/ proper#.In Sep#em*er 1%$- "an;on sold #o plain#i6 Bisc'o6 #'e mac'ineries and #ram4ain #'e 'acienda )nder a pac#o de re#ro. In Sep#em*er 1%$3- @o#a #rans/erred saidcredi# #o de/endan# Cia. "eneral de Ta*aco. "an;on e:ec)#ed a mor#gage in /avor




1

o/ Cia. "eneral de Ta*aco on #'e 'acienda as sec)ri# /or #'e loan o/ P,&- $3. In1%$,- #'e receiver o/ "an;on #oo5 possesion od said proper#ies. T'e plain#i6 ?led acomplain# praing /or #'e deliver o/ #'e mac'ineries and #ram4a sold #o 'im.

T'e #rial co)r# decided /or #'e de/endan# *)# 4i#' plain#i6 'aving a reserved rig'#agains# "an;on /or #'e s)m paid /or said proper#ies.

Iss)eW'e#'er or no# #'e mac'ineries and #ram4a are incl)ded in #'e mor#agage.

SC R)lingIn #'e ins#r)men#s o/ mor#gage- e:ec)#ed prior #o #'e sale #o #'e plain#i6 4i#'pac#o de re#ro- #'e improvemen#s alread mo)n#ed appear as e:pressl mor#gageda# #'e #ime o/ e:ec)#ing #'e ?rs# mor#gage in 1%$ and la#er on #o #'e #rans/er o/ credi# #o Cia general de #a*aco in 1%$3. >rom none o/ said ins#r)men#s does i#appear #'a# #'e con#rac#ing par#ies 'ad e:pressl agreed #o e:cl)de #'e saidmac'ineries and #ram4a /rom #'e repea#ed mor#gages o/ said 'acienda.

I# is a r)le #'a# in a mor#gage o/ real es#a#e- #'e improvemen#s on #'e same areincl)ded9 #'ere/ore- all o*8ec#s permanen#l a##ac'ed #o a mor#gaged *)ilding orland- al#'o)g' #'e ma 'ave *een placed #'ere a/#er #'e mor#gaged 4ascons#i#)#ed- are also incl)ded.Ass)ming #'a# #'e o4ner o/ a mor#gaged proper# is en#i#led #o dispose o/ #'esame- s)c' disposal 'o4ever- does no# release i# /rom #'e mor#gage 4i#' 4'ic' i#is enc)m*ered- inasm)c' as #'e rig'# o/ #'e credi#or c)r#ails #'a# o/ #'e said o4nero/ #'e mor#gaged proper#- and #'e p)rc'aser is necessaril *o)nd #o ac5no4ledgeand respec# #'e enc)m*rances 4'ic' is a# #'e disposi#ion o/ #'e credi#or in order#'a# )nder #'e #erms o/ #'e con#rac#- 'e ma recover 'is credi# /rom #'e val)e#'ereo/.

Bisc'o6 can no# ac()ire an rig'# #o indemni# /or loss or damages- /or #'e reason#'a# 'e p)rc'ased goods #'a# 4ere alread lia*le #o #'e $mor#gage. T'e sale 4ase6ec#ed long a/#er #'e proper# 4as mor#gaged. He #'ere/ore did no# o*#ainpossession o/ #'e same.

E6ec# o/ mor#gage o/ lo#s

Paderes vs. CA".R. No. 137$739 J)l 1,- $$,

>ac#s

On Sep#em*er 1%+- @anila In#erna#ional Cons#r)c#ion Corpora#ion 0@ICC2e:ec)#ed a real es#a#e mor#agage over 1 regis#ered parcels o/ land incl)ding #'eimprovemen#s #'ereon in /avor o/ Banco >ilipino in order #o sec)re a loan o/ P1-++,-$$$.$$. T'e 1 mor#gaged proper#ies incl)ded #4o lo#s- 4'ic' 4ass)*se()en#l sold * @ICC on A)g)s# 1%+& #o pe#i#ioners. Nei#'er sale 4asregis#ered- 'o4ever.>or /ail)re o/ @ICC #o se##le i#s o*liga#ions- Banco >ilipino ?led a veri?ed pe#i#ion /or#'e e:#ra8)dicial /oreclos)re o/ @ICCMs mor#gage.

T'erea/#er- a 4ri# o/ possession 4as iss)ed ordering #'e pe#i#ioners #o vaca#e #'epremises 4i#'in 7 das /rom receip# #'ereo/.

Pe#i#ioners arg)ed #'a# 'aving p)rc'ased #'eir respec#ive proper#ies in good /ai#'/rom @ICC- #'e are #'ird par#ies 4'ose rig'# #'ere#o are s)perior #o #'a# o/ Banco>ilipino9 #'e are s#ill en#i#led #o redeem #'e proper#ies and in /ac# a *indingagreemen# *e#4een #'em and #'e *an5 'ad *een reac'ed9 #'eir respec#ive 'o)sess'o)ld no# 'ave *een incl)ded in #'e a)c#ion sale o/ #'e mor#gaged proper#ies.

HeldPe#ioners posi#ion clas'es 4i#' precep#s 4ellen#renc'ed in la4. B Ar#icle 1 o/ #'e Civil Code- a mor#gage direc#l and immedia#el s)*8ec#s #'e proper# on4'ic' i# is imposed- 4'oever #'e possessor ma *e- #o #'e /)l?llmen# o/ #'e




o*liga#ion /or 4'ose sec)ri# i# 4as cons#i#)#ed. Sale or #rans/er canno# a6ec# orrelease #'e mor#gage.

A p)rc'aser is necessaril *o)nd #o ac5no4ledge and respec# #'e enc)m*rance #o4'ic' is s)*8ec#ed #'e p)rc'ased #'ing and 4'ic' is a# #'e disposal o/ #'e credi#orin order #'a# 'e- )nder #'e #erms o/ #'e con#rac#- ma recover #'e amo)n# o/ 'iscredi# #'ere/rom. >or- a recorded real es#a#e mor#gage is a rig'# in rem- a lien on#'e proper# 4'oever i#s o4ner ma *e. Beca)se #'e personali# o/ #'e o4ner isdisregarded9 #'e mor#gage s)*sis#s no#4i#'s#anding c'anges o/ o4ners'ip9 #'e las##rans/eree is 8)s# as m)c' o/ a de*#or as #'e ?rs# one9 and #'is- independen# o/ 4'e#'er #'e #rans/eree 5no4s or no# #'e person o/ #'e mor#gagee. So i# is- #'a# amor#gage lien is insepera*le /rom #'e proper# mor#gaged. All s)*se()en#p)rc'asers #'ereo/ m)s# respec# #'e mor#gage- 4'e#'er #'e #rans/er #o #'em *e4i#' or 4i#'o)# #'e consen# o/ #'e mor#gagee. >or- #'e mor#gage- )n#il disc'arge-/ollo4s #'e proper#.

c. Pac#)m de non alienando- S#ip)la#ions /or*idding #'e o4ner /rom aliena#ing #'e immova*le are void. 0Ar#icle

1&$2

B. E6ec#s as #o #'e @or#gagee- T'e mor#gage credi# ma *e aliena#ed or assigned #o a #'ird person- in 4'ole or in par#-

4i#' #'e /ormali#ies re()ired * la4. 0Ar#icle 1+2- A mor#gagee in possessionis s)*8ec# #o #'e r)les o/ an#ic'resis in #'a# 'e ass)mes #'e

o*liga#ions o/ an an#ic're#ic credi#or.

W'ere mor#gagee #rans/erred 'is credi# Please re/er #o #'e case o/ Bisc'o6 vs. Pomar

V. >oreclos)re G @odesA. J)dicial

R<!E +- R)les o/ Co)r# >OREC!OS<RE O> REA! ESTATE @ORT"A"E

Sec#ion 1. Complain# in ac#ion /or /oreclos)re.In an ac#ion /or #'e /oreclos)re o/ a mor#gage or o#'er enc)m*rance )pon real es#a#e- #'ecomplain# s'all se# /or#' #'e da#e and d)e e:ec)#ion o/ #'e mor#gage9 i#s assignmen#s- i/ an9#'e names and residences o/ #'e mor#gagor and #'e mor#gagee9 a descrip#ion o/ #'emor#gaged proper#9 a s#a#emen# o/ #'e da#e o/ #'e no#e or o#'er doc)men#ar evidence o/ #'e o*liga#ion sec)red * #'e mor#gage- #'e amo)n# claimed #o *e )npaid #'ereon9 and #'enames and residences o/ all persons 'aving or claiming an in#eres# in #'e proper#

s)*ordina#e in rig'# #o #'a# o/ #'e 'older o/ #'e mor#gage- all o/ 4'om s'all *e madede/endan#s in #'e ac#ion.

Sec. . J)dgmen# on /oreclos)re /or pamen# or sale.I/ )pon #'e #rial in s)c' ac#ion #'e co)r# s'all ?nd #'e /ac#s se# /or#' in #'e complain# #o *e#r)e- i# s'all ascer#ain #'e amo)n# d)e #o #'e plain#i6 )pon #'e mor#gage de*# or o*liga#ion-incl)ding in#eres# and o#'er c'arges as approved * #'e co)r#- and cos#s- and s'all render 8)dgmen# /or #'e s)m so /o)nd d)e and order #'a# #'e same *e paid #o #'e co)r# or #o #'e 8)dgmen# o*ligee 4i#'in a period o/ no# less #'an nine# 0%$2 das nor more #'an one ')ndred#4en# 01$2 das /rom #'e en#r o/ 8)dgmen#- and #'a# in de/a)l# o/ s)c' pamen# #'eproper# s'all *e sold a# p)*lic a)c#ion #o sa#is/ #'e 8)dgmen#.

Sec. &. Sale o/ mor#gaged proper#9 e6ec#.W'en #'e de/endan#- a/#er *eing direc#ed #o do so as provided in #'e ne:# preceding sec#ion-/ails #o pa #'e amo)n# o/ #'e 8)dgmen# 4i#'in #'e period speci?ed #'erein- #'e co)r#- )ponmo#ion- s'all order #'e proper# #o *e sold in #'e manner and )nder #'e provisions o/ R)le &%and o#'er reg)la#ions governing sales o/ real es#a#e )nder e:ec)#ion. S)c' sale s'all no#a6ec# #'e rig'#s o/ persons 'olding prior enc)m*rances )pon #'e proper# or a par# #'ereo/-and 4'en con?rmed * an order o/ #'e co)r#- also )pon mo#ion- i# s'all opera#e #o dives# #'erig'#s in #'e proper# o/ all #'e par#ies #o #'e ac#ion and #o ves# #'eir rig'#s in #'e p)rc'aser-s)*8ec# #o s)c' rig'#s o/ redemp#ion as ma *e allo4ed * la4.

<pon #'e ?nali# o/ #'e order o/ con?rma#ion or )pon #'e e:pira#ion o/ #'e period o/ redemp#ion 4'en allo4ed * la4- #'e p)rc'aser a# #'e a)c#ion sale or las# redemp#ioner- i/




&

an- s'all *e en#i#led #o #'e possession o/ #'e proper# )nless a #'ird par# is ac#)all 'olding#'e same adversel #o #'e 8)dgmen# o*ligor. T'e said p)rc'aser or las# redemp#ioner masec)re a 4ri# o/ possession- )pon mo#ion- /rom #'e co)r# 4'ic' ordered #'e /oreclos)re.

Sec. 3. Disposi#ion o/ proceeds o/ sale. T'e amo)n# reali;ed /rom #'e /oreclos)re sale o/ #'e mor#gaged proper# s'all- a/#erded)c#ing #'e cos#s o/ #'e sale- *e paid #o #'e person /oreclosing #'e mor#gage- and 4'en#'ere s'all *e an *alance or resid)e- a/#er paing o6 #'e mor#gage de*# d)e- #'e same s'all*e paid #o 8)nior enc)m*rancers in #'e order o/ #'eir priori#- #o *e ascer#ained * #'e co)r#-or i/ #'ere *e no s)c' enc)m*rancers or #'ere *e a *alance or resid)e a/#er pamen# #o #'em-#'en #o #'e mor#gagor or 'is d)l a)#'ori;ed agen#- or #o #'e person en#i#led #o i#.

Sec. ,. Ho4 sale #o proceed in case #'e de*# is no# all d)e.I/ #'e de*# /or 4'ic' #'e mor#gage or enc)m*rance 4as 'eld is no# all d)e as provided in #'e 8)dgmen#- as soon as a s)=cien# por#ion o/ #'e proper# 'as *een sold #o pa #'e #o#alamo)n# and #'e cos#s d)e- #'e sale s'all #ermina#e9 and a/#er4ards- as o/#en as more*ecomes d)e /or principal or in#eres# and o#'er valid c'arges- #'e co)r# ma- on mo#ion- ordermore #o *e sold. B)# i/ #'e proper# canno# *e sold in por#ions 4i#'o)# pre8)dice #o #'e par#ies-#'e 4'ole s'all *e ordered #o *e sold in #'e ?rs# ins#ance- and #'e en#ire de*# and cos#s s'all*e paid- i/ #'e proceeds o/ #'e sale *e s)=cien# #'ere/or- #'ere *eing a re*a#e o/ in#eres#4'ere s)c' re*a#e is proper.

Sec. . De?cienc 8)dgmen#.I/ )pon #'e sale o/ an real proper# as provided in #'e ne:# preceding sec#ion #'ere *e a*alance d)e #o #'e plain#i6 a/#er appling #'e proceeds o/ #'e sale- #'e co)r#- )pon mo#ion-s'all render 8)dgmen# agains# #'e de/endan# /or an s)c' *alance /or 4'ic'- * #'e record o/ #'e case- 'e ma *e personall lia*le #o #'e plain#i6- )pon 4'ic' e:ec)#ion ma iss)eimmedia#el i/ #'e *alance is all d)e a# #'e #ime o/ #'e rendi#ion o/ #'e 8)dgmen#9 o#'er4ise-#'e plain#i6 s'all *e en#i#led #o e:ec)#ion a# s)c' #ime as #'e *alance remaining *ecomes d)e)nder #'e #erms o/ #'e original con#rac#- 4'ic' #ime s'all *e s#a#ed in #'e 8)dgmen#.

Sec. 7. Regis#ra#ion.A cer#i?ed cop o/ #'e ?nal order o/ #'e co)r# con?rming #'e sale s'all *e regis#ered in #'eregis#r o/ deeds. I/ no rig'# o/ redemp#ion e:is#s- #'e cer#i?ca#e o/ #i#le in #'e name o/ #'emor#gagor s'all *e cancelled- and a ne4 one iss)ed in #'e name o/ #'e p)rc'aser.

W'ere a rig'# o/ redemp#ion e:is#s- #'e cer#i?ca#e o/ #i#le in #'e name o/ #'e mor#gagor s'allno# *e cancelled- *)# #'e cer#i?ca#e o/ sale and #'e order con?rming #'e sale s'all *eregis#ered and a *rie/ memorand)m #'ereo/ made * #'e regis#rar o/ deeds )pon #'ecer#i?ca#e o/ #i#le. In #'e even# #'e proper# is redeemed- #'e deed o/ redemp#ion s'all *eregis#ered 4i#' #'e regis#r o/ deeds- and a *rie/ memorand)m #'ereo/ s'all *e made * #'e

regis#rar o/ deeds on said cer#i?ca#e o/ #i#le.

I/ #'e proper# is no# redeemed- #'e ?nal deed o/ sale e:ec)#ed * #'e s'eri6 in /avor o/ #'e p)rc'aser a# #'e /oreclos)re sale s'all *e regis#ered 4i#' #'e regis#r o/ deeds94'ere)pon #'e cer#i?ca#e o/ #i#le in #'e name o/ #'e mor#gagor s'all *e cancelled and a ne4one iss)ed in #'e name o/ #'e p)rc'aser.

B. E:#ra8)dicial

Proced)reA.@. No. %%1$$,$- A)g)s# 7- $$1 PROCED<RE IN ETRAJ<DICIA! >OREC!OS<RE O>@ORT"A"E

T'e /ollo4ing proced)res are 'ere* prescri*ed in e:#ra8)dicial /oreclos)re o/ mor#gages1. All applica#ions /or e:#ra8)dicial /oreclos)re o/ mor#gage 4'e#'er )nder #'e direc#ion o/

#'e s'eri6 or a no#ar p)*lic s'all *e ?led 4i#' #'e E:ec)#ive J)dge- #'ro)g' #'e Cler5 o/ co)r# 4'o is also #'e E:O=cio S'eri6.

. <pon receip# o/ an applica#ion /or e:#ra8)dicial /oreclos)re o/ mor#gage- i# s'all *e #'ed)# o/ #'e Cler5 o/ Co)r# #oa. receive and doc5e# said applica#ion and #o s#amp #'ereon #'e corresponding ?le

n)m*er- da#e and #ime o/ ?ling9*. collec# #'e ?ling /ees and iss)e #'e corresponding o=cial receip#9




3

c. e:amine- in case o/ real es#a#e mor#gage /oreclos)re- 4'e#'er #'e applican# 'ascomplied 4i#' all #'e re()iremen#s *e/ore #'e p)*lic a)c#ion is cond)c#ed )nder #'edirec#ion o/ #'e s'eri6 or a no#ar p)*lic

d. sign and iss)e #'e cer#i?ca#e o/ sale- s)*8ec# #o #'e approval o/ #'e E:ec)#ive J)dge- orin 'is a*sence- #'e ViceE:ec)#ive J)dge. No cer#i?ca#e o/ sale s'all *e iss)ed in /avoro/ #'e 'ig'es# *idder )n#il all /ees s'all 'ave *een paid9 Provided- #'a# in no case s'all#'e amo)n# paa*le e:ceed P1$$-$$$.$$9

e. a/#er #'e cer#i?ca#e o/ sale 'as *een iss)ed #o #'e 'ig'es# *idder- 5eep #'e comple#erecords- 4'ile a4ai#ing an redemp#ion 4i#'in a period o/ one 012 ear /rom da#e o/ regis#ra#ion o/ #'e cer#i?ca#e o/ sale 4i#' #'e Regis#er o/ Deeds concerned- a/#er 4'ic'-#'e records s'all *e arc'ived. No#4i#'s#anding #'e /oregoing provision- 8)ridical persons4'ose proper# is sold p)rs)an# #o an e:#ra8)dicial /oreclos)re- s'all 'ave #'e rig'# #oredeem #'e proper# )n#il- *)# no# a/#er- #'e regis#ra#ion o/ #'e cer#i?ca#e o/ /oreclos)resale 4'ic' in no case s'all *e more #'an #'ree 0&2 mon#'s a/#er /oreclos)re- 4'ic'everis earlier.W'ere #'e applica#ion concerns #'e e:#ra8)dicial /oreclos)re o/ mor#gages o/ real

es#a#es andUor c'a##els in di6eren# loca#ions covering one inde*#edness- onl one ?ling /eecorresponding #o s)c' inde*#edness s'all *e collec#ed. T'e collec#ing Cler5 o/ Co)r# s'all-apar# /rom #'e o=cial receip# o/ #'e /ees- iss)e a cer#i?ca#e o/ pamen# indica#ing #'eamo)n# o/ inde*#edness- #'e ?ling /ees collec#ed- #'e mor#gages so)g'# #o *e /oreclosed-#'e real es#a#es andUor c'a##els mor#gaged and #'eir respec#ive loca#ions- 4'ic' cer#i?ca#es'all serve #'e p)rpose o/ 'aving #'e applica#ion doc5e#ed 4i#' #'e Cler5s o/ Co)r# o/ #'eplaces 4'ere #'e o#'er proper#ies are loca#ed and o/ allo4ing #'e e:#ra8)dicial /oreclos)res#o proceed #'erea#.

&. T'e no#ices o/ a)c#ion sale in e:#ra8)dicial /oreclos)re /or p)*lica#ion * #'e s'eri6 or * ano#ar p)*lic s'all *e p)*lis'ed in a ne4spaper o/ general circ)la#ion

3. T'e E:ec)#ive J)dge s'all- 4i#' #'e assis#ance o/ #'e Cler5 o/ Co)r#- raXe applica#ions /ore:#ra8)dicial /oreclos)re o/ mor#gage )nder #'e direc#ion o/ #'e s'eri6 among all s'eri6s-incl)ding #'ose assigned #o #'e O=ce o/ #'e Cler5 o/ Co)r# and S'eri6s IV assigned in #'e*ranc'es.

,. T'e nameUs o/ #'e *idderUs s'all *e repor#ed * #'e s'eri6 or #'e no#ar p)*lic 4'ocond)c#ed #'e sale #o #'e Cler5 o/ Co)r# *e/ore #'e iss)ance o/ #'e cer#i?ca#e o/ sale.

De?cienc R)le

DE7ELOPMENT BAN OF TE PILIPPINES vs. ALEJANDRO and ADELAIDALICUANANG.R. N!. 9;;, F&"#$a#- <, <;;

Facts:R&s'!nd&nt s'!$s&s A+&and#! and Ad&+ada Lc$anan )&#& %#ant&d a '%%&#- +!an n th&

a*!$nt !( P>,;; "- '&tt!n&#, &vd&nc&d "- a '#!*ss!#- n!t& dat&d S&'t&*"&# <;, 9> ands&c$#&d "- a #&a+ &stat& *!#t%a%& !v&# a ;=s0$a#& *&t&# 'a#c&+ !( +and )th a t)!=st!#&- "$+dn%.Th& +!anHs *at$#t- dat& )as S&'t&*"&# <, 9. P&tt!n&# %#ant&d #&s'!nd&nts an addt!na+ +!an!( P9<,;;; &vd&nc&d "- a '#!*ss!#- n!t& dat&d Ma- <, 9 'a-a"+& !n !# "&(!#& th& -&a# 9;.Ths )as s&c$#&d "- a #&a+ &stat& *!#t%a%& !v&# (!$# 'a#c&+s !( +and st$at&d n Pan%asnan. OnOct!"&# <, 9, '&tt!n&# %#ant&d #&s'!nd&nt s'!$s&s an!th&# +!an !( P<<,;;; &vd&nc&d "- a '#!*ss!#- n!t& *at$#n% !n Oct!"&# , 9. Ths )as s&c$#&d "- a #&a+ &stat& *!#t%a%& &/&c$t&dn (av!# !( '&tt!n&# !v&# an!th&# th#&& 'a#c&+s !( +and

On J$+- , 99, '&tt!n&# s&nt a +&tt&# "- #&%st&#&d *a+ t! #&s'!nd&nts n(!#*n% th&*that, snc& th& c!ndt!ns !( th& *!#t%a%& had "&&n "#&ach&d, '&tt!n&# )!$+d hav& th& *!#t%a%&d

'#!'&#t&s s!+d "- th& sh&#(( $nd&# Act 9. Th& t!ta+ a*!$nt d$& (#!* th& th#&& +!ans had "- th&n "a++!!n&d t! P,<.<.

On J$+- <;, 99, '&tt!n&# (+&d an a''+cat!n (!# &/t#a$dca+ (!#&c+!s$#&. Th& *!#t%a%&d '#!'&#t&s )&#& s!+d n a '$"+c a$ct!n !n D&c&*"&# 9, 99. P&tt!n&#, as th& h%h&st "dd&#,ac0$#&d th&* (!# a t!ta+ !( P9,>;. Th& c&#t(cat& !( sa+& )as #&%st&#&d !n Jan$a#- <, 9<.

On F&"#$a#- >, 9, '&tt!n&# c!ns!+dat&d ts !)n&#sh' !v&# th& '#!'&#t&s. A(t&# *!#&than a -&a# !# !n Oct!"&# 9, 9>, '&tt!n&# )#!t& #&s'!nd&nts "- #&%st&#&d *a+, n(!#*n% th&*that th& '#!'&#t&s 1n!) ac0$#&d ass&ts !( th& "an62 )!$+d "& ds'!s&d !( "- '$"+c a$ct!n. On N!v&*"&# 99, 9>, '&tt!n&# '$"+sh&d an adv&#ts&*&nt statn% that !n N!v&*"&# 9>, 9>, th&




,

'#!'&#t&s )!$+d "& s!+d "- !#a+ "ddn%. On ths dat&, h!)&v&#, th&#& )&#& n! "dd&#s.

On N!v&*"&# 9, 9>, '&tt!n&# s&nt #&s'!nd&nts a +&tt&# n(!#*n% th&* that th& '#!'&#t&s c!$+d "& #&ac0$#&d "- n&%!tat&d sa+& (!# cash !# nsta++*&nt.Th#&& da-s +at&#, h!)&v&#,!n N!v&*"&# 9, 9>, th& '#!'&#t&s )&#& s!+d th#!$%h n&%!tat&d sa+& t! !n& E*&+ta A. P&#a+ta.

R&s'!nd&nts )&#& n(!#*&d !( th& sa+& "- '&tt!n&# th#!$%h a +&tt&# dat&d D&c&*"&# , 9>.

On th& sa*& da-, '&tt!n&# &/&c$t&d a d&&d !( c!ndt!na+ sa+& n (av!# !( P&#a+ta. OnD&c&*"&# 99, 9>, #&s'!nd&nts !((&#&d t! #&'$#chas& th& '#!'&#t&s (#!* '&tt!n&# "$t th&- hada+#&ad- "&&n s!+d t! P&#a+ta. R&s'!nd&nts th&n (+&d a c!*'+ant (!# #&c!v&#- !( #&a+ '#!'&#t&s andda*a%&s.

Iss$&:3h&th&# !# n!t #&s'!nd&nts a#& +a"+& (!# th& d&(c&nc- c+a* !( '&tt!n&#.

Ta6& N!t&: Th& '#c& n )hch th& *!#t%a%&d '#!'&#t- )as s!+d )as P9;>,;;; )hch )as +&ss than

th& a*!$nt !( #&s'!nd&ntsH nd&"t&dn&ss )hch s P99,><..

SC R$+n%: N!. th& #&s'!nd&nts a#& n!t #&s'!ns"+& (!# th& d&(c&nc- c+a*. 3h+& t s t#$& that n

&/t#a$dca+ (!#&c+!s$#& !( *!#t%a%&, th& *!#t%a%&& has th& #%ht t! #&c!v&# th& d&(c&nc- (#!* th&d&"t!# ths '#&s$''!s&s that th& (!#&c+!s$#& *$st (#st "& va+d.

B$t n ths cas&, th& (!#&c+!s$#& s nva+d. I( d&*and )as *ad& and d$+- #&c&v&d "- th&#&s'!nd&nts and th& +att&# st++ dd n!t 'a-, th&n th&- )&#& a+#&ad- n d&(a$+t and (!#&c+!s$#& )as '#!'&#. !)&v&#, ( d&*and )as n!t *ad&, th&n th& +!ans had n!t -&t "&c!*& d$& and d&*anda"+&.Ths *&ant that #&s'!nd&nts had n!t d&(a$+t&d n th&# 'a-*&nts and th& (!#&c+!s$#& "- '&tt!n&#

)as '#&*at$#&. F!#&c+!s$#& s va+d !n+- )h&n th& d&"t!# s n d&(a$+t n th& 'a-*&nt !( hs!"+%at!n.

V. Redemp#ionA. R)les

J)dicial >oreclos)re and E:#ra8)dicial >oreclos)re

@or#gagor >oreclos)re

Na#)ral Person

J)dicial >oreclos)re E:#ra8)dicial >oreclos)re

No rig'# o/ redemp#ion9 onle()i# o/ redemp#ion 0no# less#'an %$ das nor more #'an1$ das /rom en#r o/ 8)dgmen#2

Rig'# o/ Redemp#ion01 ear /rom regis#ra#ion o/ #'ecer#i?ca#e o/ sale2

J)ridical PersonE()i# o/ Redemp#ion E()i# o/ Redemp#ion

0%$ das /rom /oreclos)re no#la#er #'an regis#ra#ion o/ sale2

@or#gage Ban5

@or#gagor >oreclos)re

Na#)ral Person

J)dicial >oreclos)re E:#ra8)dicial >oreclos)re

Rig'# o/ Redemp#ion Rig'# o/ Redemp#ion

J)ridical Person Rig'# o/ Redemp#ionE()i# o/ Redemp#ion0%$ das /rom /oreclos)re no#la#er #'an regis#ra#ion o/ sale2

Rig'# o/ Redemp#ion vs. E()i# o/ Redemp#ion

UERTA ALBA RESORT INC. vs. COURT OF APPEALS and SNDICATED MANAGEMENTGROUP INC




G.R. N!. 9<, S&'t&*"&# 9, <;;;

Facts:In a c!*'+ant (!# $dca+ (!#&c+!s$#& !( *!#t%a%& )th '#&+*na#- n$nct!n (+&d !n

Oct!"&# 9, 9, th& h&#&n '#vat& #&s'!nd&nt s!$%ht th& (!#&c+!s$#& !( (!$# 1>2 'a#c&+s !( +and

*!#t%a%&d "- '&tt!n&# t! Int&#c!n F$nd R&s!$#c&, Inc. 1@Int&#c!n@2.

P#vat& #&s'!nd&nt nstt$t&d th& cas& as *!#t%a%&&=ass%n&& !( a +!an a*!$ntn% t! P.*++!n !"tan&d "- '&tt!n&# (#!* Int&#c!n, n )h!s& (av!# '&tt!n&# *!#t%a%&d th& a(!#&sad 'a#c&+s !( +and as s&c$#t- (!# th& sad +!an.

In ts ans)&# "&+!), '&tt!n&# 0$&st!n&d th& ass%n*&nt "- Int&#c!n !( ts *!#t%a%& #%htth&#&!v&# t! th& '#vat& #&s'!nd&nt, !n th& %#!$nd that th& sa*& )as $+t#a v#&s. P&tt!n&# a+s!0$&st!n&d d$#n% th& t#a+ th& c!##&ctn&ss !( th& cha#%&s and nt&#&st !n th& *!#t%a%& d&"t n0$&st!n.

On A'#+ ;, 9<, th& t#a+ c!$#t, ca*& !$t )th ts d&cs!n %#antn% h&#&n '#vat&#&s'!nd&nt SMGI5s c!*'+ant (!# $dca+ (!#&c+!s$#& !( *!#t%a%&. U'!n a''&a+, t )as ds*ss&d!n th& %#!$nd !( +at& 'a-*&nt !( d!c6&t (&&s. Lat&#, th& d&cs!n "&ca*& (na+ and &/&c$t!#-.

On J$+- >, 9>, '#vat& #&s'!nd&nt (+&d )th th& t#a+ c!$#t !( !#%n a *!t!n (!# &/&c$t!n!( th& D&cs!n '#!*$+%at&d !n A'#+ ;, 9< n Cv+ Cas& N!. =><>. Th& sad *!t!n )as%#ant&d !n J$+- 9, 9>. Acc!#dn%+-, !n J$+- 9, 9> a )#t !( &/&c$t!n ss$&d and, !n J$+- <;,9>, a N!tc& !( L&v- and E/&c$t!n )as ss$&d "- th& Sh&#(( c!nc&#n&d, )h! ss$&d !n A$%$st9, 9> a N!tc& !( Sh&#((5s Sa+& (!# th& a$ct!n !( s$"&ct '#!'&#t&s !n S&'t&*"&# , 9>.

On A$%$st <, 9>, '&tt!n&# (+&d )th th& sa*& t#a+ c!$#t an U#%&nt M!t!n t! $ash

and S&t Asd& 3#t !( E/&c$t!n asc#"n% t! t %#av& a"$s& !( dsc#&t!n n ss$n% th& 0$&st!n&d3#t !( E/&c$t!n. T! s$''!#t ts *!t!n, '&tt!n&# nvt&d att&nt!n and a#%$&d that th& #&c!#ds !( th& cas& )&#& st++ )th th& C!$#t !( A''&a+s and th&#&(!#&, ss$anc& !( th& )#t !( &/&c$t!n )as '#&*at$#& snc& th& 9;=da- '&#!d (!# '&tt!n&# t! 'a- th& $d%*&nt !"+%at!n had n!t -&t +a's&dand '&tt!n&# had n!t -&t d&(a$+t&d n th& 'a-*&nt th&#&!( snc& n! d&*and (!# ts 'a-*&nt )as*ad& "- th& '#vat& #&s'!nd&nt. In '&tt!n&#5s !)n )!#ds, th& ds'$t& "&t)&&n th& 'a#t&s )as@'#nc'a++- !n th& ss$& as t! )h&n th& 9;=da- '&#!d )thn )hch $&#ta A+"a *a- &/&#cs& ts&0$t- !( #&d&*'t!n sh!$+d "& c!$nt&d.@

Iss$&:3h&th&# !# n!t th& '&tt!n&# has th& !n&=-&a# #%ht !( #&d&*'t!n !( s$"&ct '#!'&#t&s

$nd&# S&ct!n !( R&'$"+c Act N!. !th&#)s& 6n!)n as th& G&n&#a+ Ban6n% Act.

SC R$+n%: N!. Th& '&tt!n&# can n! +!n%&# nv!6& S&ct!n !( R&'$"+c Act N!. "&ca$s& t (a+&d t!s&as!na"+- nv!6& th& sad '#!vs!n.

On th& dstnct!n "&t)&&n th& &0$t- !( #&d&*'t!n and #%ht !( #&d&*'t!n, th& cas& !( G#&%!#! . L*'n vs. Int&#*&dat& A''&++at& C!$#t, c!*&s t! th& (!#&. &+d th& C!$#t n th& sadcas&:

@Th& &0$t- !( #&d&*'t!n s, t! "& s$#&, d((&#&nt (#!* and sh!$+d n!t "& c!n($s&d )th th& #%ht !(

#&d&*'t!n.

Th& #%ht !( #&d&*'t!n n #&+at!n t! a *!#t%a%& K $nd&#st!!d n th& s&ns& !( a '#&#!%atv&t! #&=ac0$#& *!#t%a%&d '#!'&#t- a(t&# #&%st#at!n !( th& (!#&c+!s$#& sa+& K &/sts !n+- n th& cas& !( th& &/t#a$dca+ (!#&c+!s$#& !( th& *!#t%a%&. N! s$ch #%ht s #&c!%n&d n a $dca+ (!#&c+!s$#&&/c&'t !n+- )h&#& th& *!#t%a%&& s th& Ph+''n& Nat!na+ Ban6 !# a "an6 !# "an6n% nstt$t!n.

3h&#& a *!#t%a%& s (!#&c+!s&d &/t#a$dca++-, Act 9 %#ants t! th& *!#t%a%!# th& #%ht !( #&d&*'t!n )thn !n& 192 -&a# (#!* th& #&%st#at!n !( th& sh&#((5s c&#t(cat& !( (!#&c+!s$#& sa+&.




7

3h&#& th& (!#&c+!s$#& s $dca++- &((&ct&d, h!)&v&#, n! &0$va+&nt #%ht !( #&d&*'t!n&/sts. Th& +a) d&c+a#&s that a $dca+ (!#&c+!s$#& sa+& 5)h&n c!n(#*&d "& an !#d&# !( th& c!$#t. . . .sha++ !'&#at& t! dv&st th& #%hts !( a++ th& 'a#t&s t! th& act!n and t! v&st th&# #%hts n th& '$#chas&#, s$"&ct t! s$ch #%hts !( #&d&*'t!n as *a- "& a++!)&d "- +a).5 S$ch #%hts &/c&'t!na++-5a++!)&d "- +a)5 1.&., &v&n a(t&# c!n(#*at!n "- an !#d&# !( th& c!$#t2 a#& th!s& %#ant&d "- th&

cha#t&# !( th& Ph+''n& Nat!na+ Ban6 1Acts N!. <> and <2, and th& G&n&#a+ Ban6n% Act1R.A. 2. Th&s& +a)s c!n(&# !n th& *!#t%a%!#, hs s$cc&ss!#s n nt&#&st !# an- $d%*&nt c#&dt!# !( th& *!#t%a%!#, th& #%ht t! #&d&&* th& '#!'&#t- s!+d !n (!#&c+!s$#& a(t&# c!n(#*at!n "- th&c!$#t !( th& (!#&c+!s$#& sa+& )hch #%ht *a- "& &/&#cs&d )thn a '&#!d !( !n& 192 -&a#,c!$nt&d (#!* th& dat& !( #&%st#at!n !( th& c&#t(cat& !( sa+& n th& R&%st#- !( P#!'&#t-.

B$t, t! #&'&at, n! s$ch #%ht !( #&d&*'t!n &/sts n cas& !( $dca+ (!#&c+!s$#& !( a*!#t%a%& ( th& *!#t%a%&& s n!t th& PNB !# a "an6 !# "an6n% nstt$t!n. In s$ch a cas&, th&(!#&c+!s$#& sa+&, 5)h&n c!n(#*&d "- an !#d&# !( th& c!$#t. . . sha++ !'&#at& t! dv&st th& #%hts !( a++th& 'a#t&s t! th& act!n and t! v&st th&# #%hts n th& '$#chas&#.5 Th&#& th&n &/sts !n+- )hat s6n!)n as th& &0$t- !( #&d&*'t!n. Ths s s*'+- th& #%ht !( th& d&(&ndant *!#t%a%!# t!

&/tn%$sh th& *!#t%a%& and #&tan !)n&#sh' !( th& '#!'&#t- "- 'a-n% th& s&c$#&d d&"t )thn th&;=da- '&#!d a(t&# th& $d%*&nt "&c!*&s (na+, n acc!#danc& )th R$+& , !# &v&n a(t&# th&(!#&c+!s$#& sa+& "$t '#!# t! ts c!n(#*at!n.

S&ct!n <, R$+& '#!vd&s that 5. . I( $'!n th& t#a+ . . th& c!$#t sha++ (nd th& (acts s&t (!#th n th& c!*'+ant t! "& t#$&, t sha++asc&#tan th& a*!$nt d$& t! th& '+ant(( $'!n th& *!#t%a%& d&"t !# !"+%at!n, nc+$dn% nt&#&stand c!sts, and sha++ #&nd&# $d%*&nt (!# th& s$* s! (!$nd d$& and !#d&# th& sa*& t! "& 'ad nt!c!$#t )thn a '&#!d !( n!t +&ss than nn&t- 1;2 da-s (#!* th& dat& !( th& s&#vc& !( s$ch !#d&#, andthat n d&(a$+t !( s$ch 'a-*&nt th& '#!'&#t- "& s!+d t! #&a+& th& *!#t%a%& d&"t and c!sts.5

Ths s th& *!#t%a%!#5s &0$t- 1n!t #%ht2 !( #&d&*'t!n )hch, as a"!v& stat&d, *a- "&&/&#cs&d "- h* &v&n "&-!nd th& ;=da- '&#!d 5(#!* th& dat& !( s&#vc& !( th& !#d&#,5 and &v&na(t&# th& (!#&c+!s$#& sa+& ts&+(, '#!vd&d t "& "&(!#& th& !#d&# !( c!n(#*at!n !( th& sa+&. A(t&# s$ch !#d&# !( c!n(#*at!n, n! #&d&*'t!n can "& &((&ct&d an- +!n%&#.@1E*'hass s$''+&d2

It s "&a# st#&ssn% that '&tt!n&# av&#s n ts '&tt!n that th& Int&#c!*, '#&d&c&ss!# nnt&#&st !( th& '#vat& #&s'!nd&nt, s a c#&dt nstt$t!n, s$ch that S&ct!n !( R&'$"+c Act N!. sh!$+d a''+- n ths cas&. Stat&d d((&#&nt+-, t s th& s$"*ss!n !( '&tt!n&# that t sh!$+d "&a++!)&d t! #&d&&* s$"&ct '#!'&#t&s )thn !n& -&a# (#!* th& dat& !( sa+& as a #&s$+t !( th&(!#&c+!s$#& !( th& *!#t%a%& c!nstt$t&d th&#&!n.

Th& 'v!t !( n0$#- h&#& th&#&(!#&, s )h&th&# th& '&tt!n&# s&as!na"+- nv!6&d ts ass&#t&d

#%ht $nd&# S&ct!n !( R.A. N!. t! #&d&&* s$"&ct '#!'&#t&s.

Th& c!$#t (nds that n +%ht !( th& a(!#&stat&d (acts, t )as t!! +at& n th& da- (!# '&tt!n&# t!nv!6& a #%ht t! #&d&&* $nd&# S&ct!n !( R.A. N!. . P&tt!n&# (a+&d t! ass&#t a #%ht t!#&d&&* n s&v&#a+ c#$ca+ sta%&s !( th& '#!c&&dn%s.

Ind&&d, at th& &a#+&st !''!#t$nt-, )h&n t s$"*tt&d ts ans)&# t! th& c!*'+ant (!# $dca+(!#&c+!s$#&, '&tt!n&# sh!$+d hav& a++&%&d that t )as &ntt+&d t! th& "&n&(ca+ '#!vs!ns !( S&ct!n !( R.A. N!. "$t a%an, t dd n!t *a6& an- a++&%at!n n ts ans)&# #&%a#dn% an- #%htth&#&$nd&#. It "&a#s st#&ssn% that th& a''+ca"+t- !( S&ct!n !( R.A. N!. hn%&s !n th&(act$a+ 0$&st!n !( )h&th&# !# n!t '#vat& #&s'!nd&nt5s '#&d&c&ss!# n nt&#&st )as a c#&dt

nstt$t!n. As )as h&+d n L*'n, a $dca+ (!#&c+!s$#& sa+&, @)h&n c!n(#*&d "- an !#d&# !( th&c!$#t, . . sha++ !'&#at& t! dv&st th& #%hts !( a++ th& 'a#t&s t! th& act!n and t! v&st th&# #%hts n th& '$#chas&#, s$"&ct t! s$ch #%hts !( #&d&*'t!n as *a- "& a++!)&d "- +a)5,@ )hch c!n(&# !n th&*!#t%a%!#, hs s$cc&ss!#s n nt&#&st !# an- $d%*&nt c#&dt!# !( th& *!#t%a%!#, th& #%ht t! #&d&&*th& '#!'&#t- s!+d !n (!#&c+!s$#& a(t&# c!n(#*at!n "- th& c!$#t !( th& $dca+ (!#&c+!s$#& sa+&.Th$s, th& c+a* that '&tt!n&# s &ntt+&d t! th& "&n&(ca+ '#!vs!ns !( S&ct!n !( R.A. N!. snc& '#vat& #&s'!nd&nt5s '#&d&c&ss!#=n=nt&#&st s a c#&dt nstt$t!n s n th& nat$#& !( ac!*'$+s!#- c!$nt&#c+a* )hch sh!$+d hav& "&&n av&##&d n '&tt!n&#5s ans)&# t! th& c!*'+ant(!# $dca+ (!#&c+!s$#&.




+

Th& (a+$#& !( '&tt!n&# t! s&as!na"+- ass&#t ts a++&%&d #%ht $nd&# S&ct!n !( R.A. N!. '#&c+$d&s t (#!* s! d!n% at ths +at& sta%& cas&. Est!''&+ *a- "& s$cc&ss($++- nv!6&d ( th& 'a#t- (a+s t! #as& th& 0$&st!n n th& &a#+- sta%&s !( th& '#!c&&dn%s. Th$s, @a 'a#t- t! a cas& )h!(a+&d t! nv!6&d hs c+a* n th& *an cas&, )h+& havn% th& !''!#t$nt- t! d! s!, )++ "& '#&c+$d&d, s$"s&0$&nt+-, (#!* nv!6n% hs c+a*, &v&n ( t )&#& t#$&, a(t&# th& d&cs!n has "&c!*&

(na+, !th&#)s& th& $d%*&nt *a- "& #&d$c&d t! a *!c6&#- and th& ad*nst#at!n !( $stc& *a- "& '+ac&d n ds#&'$t&.@

B. Ho4 Done

BANCO FILIPINO SSA7INGS AND MORTGAGE BAN vs. COURT OF APPEALS andSANTIAGO 1Isa"&+a2 MEMORIAL PAR, INC.G.R. N!. 9>, J$+- , <;;

Facts:

On D&c&*"&# <;, 9, '#vat& #&s'!nd&nt Santa%! 1Isa"&+a2 M&*!#a+ Pa#6, Inc. (+&d ac!*'+ant (!# #&d&*'t!n and s'&c(c '&#(!#*anc& )th th& R&%!na+ T#a+ C!$#t !( Santa%!,Isa"&+a, B#anch <9, a%anst h&#&n '&tt!n&# Banc! F+'n! Savn%s M!#t%a%& Ban6., th&*at&#a+ and #&+&vant a++&%at!ns !( )hch #&ad as (!++!)s:

COMPLAINTP+ant((, "- c!$ns&+, t! ths !n!#a"+& C!$#t *!st #&s'&ct($++- a++&%&s:9. .<. .. That n F&"#$a#- 99, '+ant(( *!#t%a%&d th& a"!v& d&sc#"&d '#!'&#t- n (av!# !( d&(&ndant t!s&c$#& a +!an !( P;;,;;;.;; !"tan&d "- '+ant(( (#!* d&(&ndant4

>. That d$& t! th& (a+$#& !( '+ant(( t! 'a- th& a(!#&*&nt!n&d +!an, d&(&ndant (!#&c+!s&d th&*!#t%a%& and n c!ns&0$&nc& th&#&!( Sh&#(( Davd R. M&dna !( ths !n!#a"+& C!$#t ss$&d aSERIFF5S CERTIFICATE OF SALE n (av!# !( d&(&ndant )hch s dat&d Oct!"&# , 9; and)hch nst#$*&nt )as nsc#"&d at th& "ac6 !( TCT T=9<> !( Isa"&+a !n Jan$a#- <9, 994. That n a +&tt&# !( th& P#&sd&nt !( '+ant(( dat&d A$%$st , 99, '+ant(( *ad& *an(&st tsnt&#&st t! &/&#cs& ts #%ht !( #&d&*'t!n and *ad& an !((&# !( P;;,;;;.;; as #&d&*'t!n t!d&(&ndant th#!$%h th& th&n D&'$t- L0$dat!#, ROSAURO NAPA4 ths sta#t&d th& n&%!tat!n (!# th& #&d&*'t!n !( th& a"!v& d&sc#"&d '#!'&#t-4. That n a +&tt&# !( th& D&'$t- L0$dat!# dat&d Jan$a#- <, 9<, '+ant(( )as %v&n $' t! th& &nd!( Ma#ch 9< t! n&%!tat& and *a6& s'&ca+ a##an%&*&nt (!# an- sats(act!#- '+an !( 'a-*&nt (!# th& #&d&*'t!n4

. That n a +&tt&# !( th& D&'$t- L0$dat!# dat&d Ma#ch 9<, 9<, '+ant(( )as d#&ct&d t! #&*t at+&ast P;,;;;.;; t! d&(&ndant )hch )!$+d *an(&st th& nt&#&st and )++n%n&ss !( '+ant(( t!#&d&&* th& '#!'&#t-, and (!#th)th !n Ma#ch <>, 9<, '+ant(( #&*tt&d th& s$* !( P;,;;;.;; t!d&(&ndant )hch )as d$+- #&c&'t&d "- th& +att&# $nd&# O((ca+ R&c&'t N!. < A dat&d Ma#ch<>, 9<4. That n a +&tt&# !( th& P#&sd&nt !( '+ant(( dat&d Jan$a#- <;, 9, '+ant(( a*&nd&d ts (#st!((&# and *ad& an !((&# !( P9,;;;,;;;.;; as #&d&*'t!n )hch !((&# nc+$d&d a '+an !( 'a-*&nt4. That "&t)&&n Jan$a#- <;, 9 t! N!v&*"&# 9, '+ant(( &/&#t&d &a#n&st &((!#ts n !#d&# t!(na++- &((&ct th& #&d&*'t!n, "$t d&(&ndant d++- da++&d !n th& *att&#.9;. That n a +&tt&# !( Att-. ORLANDO O. SAMSON, S&n!# 7c& P#&sd&nt !( d&(&ndant, dat&d N!v&*"&# , 9, th&#& s a t$#n=a#!$nd "- d&(&ndant and s n!) d&*andn% P,;,;;;.;; as

'$#chas& '#c& !( th& '#!'&#t-, nst&ad !( th& !#%na+ a%#&&d #&d&*'t!n499. That th& d&+a- !( th& d&(&ndant n th& (na+at!n !( th& t&#*s !( #&d&*'t!n dd n!t n an-*ann&# a+t&# th& #%ht !( '+ant(( t! #&d&&* th& '#!'&#t- (#!* d&(&ndant49<. That '+ant(( s st++ n act$a+ '!ss&ss!n !( th& '#!'&#t- and nt&nd t! #&*an n act$a+ '!ss&ss!n !( th& '#!'&#t-, )h+& d&(&ndant )as n&v&# n act$a+ '!ss&ss!n !( sad '#!'&#t-49. That '+ant(( s #&ad- and )++n% t! 'a- th& #&d&*'t!n *!n&-, )hch s th& t!ta+ "an6 c+a* !( P<,>>.9 '+$s +a)($+ nt&#&st and !th&# a++!)a"+& &/'&ns&s ncd&nt t! th& (!#&c+!s$#& '#!c&&dn%s:9>. That th& +at&st act$at!ns !( d&(&ndant a#& ndcatv& !( th& #&($sa+ !( d&(&ndant t! a++!) th&&/&#cs& !( #&d&*'t!n "- h&#&n '+ant((, #&as!n (!# )hch th&#& s a n&&d (!# $dca+




%

d&t&#*nat!n !( th& #%hts and !"+%at!ns !( th& 'a#t&s t! ths cas&49. That !n acc!$nt !( th& $n+a)($+ act$at!ns !( d&(&ndant n #&($sn% th& #&d&*'t!n !( th& '#!'&#t- "- '+ant((, th& +att&# &n%a%&d th& s&#vc&s !( c!$ns&+ (!# a (&& !( P;,;;;.;; )hchd&(&ndant sh!$+d 'a- t! '+ant((.

Iss$&:3h&th&# '#vat& #&s'!nd&nt5s c!*'+ant (!# #&d&*'t!n and s'&c(c '&#(!#*anc& stat&s a

ca$s& !( act!n a%anst '&tt!n&#.

SC R$+n%:Bas&d !n th& a++&%at!ns n th& c!*'+ant, )& (nd that '#vat& #&s'!nd&nt has n! ca$s& !(

act!n (!# #&d&*'t!n a%anst '&tt!n&#.

Pa#a%#a'h > !( th& c!*'+ant stat&s:>. That d$& t! th& (a+$#& !( '+ant(( t! 'a- th& a(!#&*&nt!n&d +!an, d&(&ndant (!#&c+!s&d th&*!#t%a%& and n c!ns&0$&nc& th&#&!( Sh&#(( Davd R. M&dna !( ths !n!#a"+& C!$#t ss$&d a

SERIFF5S CERTIFICATE OF SALE n (av!# !( d&(&ndant )hch s dat&d Oct!"&# , 9; and)hch nst#$*&nt )as nsc#"&d at th& "ac6 !( TCT T=9<> !( Isa"&+a !n Jan$a#- <9, 994

Th& sh&#((5s c&#t(cat& !( sa+& )as #&%st&#&d !n Jan$a#- <9, 99. S&ct!n !( Act 9 '#!vd&s(!# th& #&0$st&s (!# a va+d #&d&*'t!n, th$s:SEC. . In a++ cas&s n )hch an &/t#a$dca+ sa+& s *ad& $nd&# th& s'&ca+ '!)&# h&#&n"&(!#&#&(&##&d t!, th& d&"t!#, hs s$cc&ss!#s n nt&#&st !# an- $dca+ c#&dt!# !# $d%*&nt c#&dt!# !( sadd&"t!#, !# an- '&#s!n havn% a +&n !n th& '#!'&#t- s$"s&0$&nt t! th& *!#t%a%& !# d&&d !( t#$st$nd&# )hch th& '#!'&#t- s s!+d, *a- #&d&&* th& sa*& at an- t*& )thn th& t&#* !( !n& -&a# (#!*and a(t&# th& dat& !( sa+&4 and s$ch #&d&*'t!n sha++ "& %!v&#n&d "- th& '#!vs!ns !( s&ct!ns (!$# h$nd#&d and s/t-=(!$# t! (!$# h$nd#&d and s/t-=s/, nc+$sv&, !( th& C!d& !( Cv+ P#!c&d$#&,

ns!(a# as th&s& a#& n!t nc!nsst&nt )th th& '#!vs!ns !( ths Act.

!)&v&#, c!nsd&#n% that '&tt!n&# s a "an6n% nstt$t!n, th& d&t&#*nat!n !( th&#&d&*'t!n '#c& s %!v&#n&d "- S&ct!n !( th& G&n&#a+ Ban6n% Act )hch '#!vd&s:

In th& &v&nt !( (!#&c+!s$#&, )h&th&# $dca++- !# &/t#a$dca++-, !( an- *!#t%a%& !n #&a+&stat& )hch s s&c$#t- (!# an- +!an %#ant&d "&(!#& th& 'assa%& !( ths Act !# $nd&# th& '#!vs!ns!( ths Act, th& *!#t%a%!# !# d&"t!# )h!s& #&a+ '#!'&#t- has "&&n s!+d at '$"+c a$ct!n, $dca++-!# &/t#a$dca++-, (!# th& ($++ !# 'a#ta+ 'a-*&nt !( an !"+%at!n t! an- "an6, "an6n% !# c#&dtnstt$t!n, )thn th& '$#v&) !( ths Act sha++ hav& th& #%ht, )thn !n& -&a# a(t&# th& sa+& !( th&#&a+ &stat& as a #&s$+t !( th& (!#&c+!s$#& !( th& #&s'&ctv& *!#t%a%&, t! #&d&&* th& '#!'&#t- "- 'a-n% th& a*!$nt (/&d "- th& c!$#t n th& !#d&# !( &/&c$t!n, !# th& a*!$nt d$& $nd&# th&

*!#t%a%& d&&d, as th& cas& *a- "&, )th nt&#&st th&#&!n at th& #at& s'&c(&d n th& *!#t%a%&, anda++ th& c!sts, and $dca+ and !th&# &/'&ns&s nc$##&d "- th& "an6 !# nstt$t!n c!nc&#n&d "- #&as!n!( th& &/&c$t!n and sa+& and as a #&s$+t !( th& c$st!d- !( sad '#!'&#t- +&ss th& nc!*& #&c&v&d(#!* th& '#!'&#t-.

C+&a#+-, th& #%ht !( #&d&*'t!n sh!$+d "& &/&#cs&d )thn th& s'&c(&d t*& +*t, )hch s!n& -&a# (#!* th& dat& !( #&%st#at!n !( th& c&#t(cat& !( sa+&. Th& #&d&*'t!n&# sh!$+d *a6& anact$a+ t&nd&# n %!!d (ath !( th& ($++ a*!$nt !( th& '$#chas& '#c& as '#!vd&d a"!v&, .&., th&a*!$nt (/&d "- th& c!$#t n th& !#d&# !( &/&c$t!n !# th& a*!$nt d$& $nd&# th& *!#t%a%& d&&d, asth& cas& *a- "&, )th nt&#&st th&#&!n at th& #at& s'&c(&d n th& *!#t%a%&, and a++ th& c!sts, and $dca+ and !th&# &/'&ns&s nc$##&d "- th& "an6 !# nstt$t!n c!nc&#n&d "- #&as!n !( th& &/&c$t!n

and sa+& and as a #&s$+t !( th& c$st!d- !( sad '#!'&#t- +&ss th& nc!*& #&c&v&d (#!* th& '#!'&#t-.

In cas& !( dsa%#&&*&nt !v&# th& #&d&*'t!n '#c&, th& #&d&*'t!n&# *a- '#&s&#v& hs #%ht!( #&d&*'t!n th#!$%h $dca+ act!n )hch n &v&#- cas& *$st "& (+&d )thn th& !n&=-&a# '&#!d!( #&d&*'t!n. Th& (+n% !( th& c!$#t act!n t! &n(!#c& #&d&*'t!n, "&n% &0$va+&nt t! a (!#*a+!((&# t! #&d&&*, )!$+d hav& th& &((&ct !( '#&s&#vn% hs #&d&*'tv& #%hts and 5(#&&n% th&&/'#at!n !( th& !n&=-&a# '&#!d. In ths cas&, th& '&#!d !( #&d&*'t!n &/'#&d !n Jan$a#- <9,9<. Th& c!*'+ant )as (+&d !n D&c&*"&# <;, 9<.

M!#&!v&#, )h+& th& c!*'+ant a++&%&s that '#vat& #&s'!nd&nt *ad& an !((&# t! #&d&&* th&




&$

s$"&ct '#!'&#t- !n A$%$st , 99, )hch )as )thn th& '&#!d !( #&d&*'t!n, t s n!t a++&%&d nth& c!*'+ant that th&#& )as an act$a+ t&nd&# !( 'a-*&nt !( th& #&d&*'t!n '#c& as #&0$#&d "- th&#$+&s. It )as a++&%&d that '#vat& #&s'!nd&nt *&#&+- *ad& an !((&# !( P;;,;;;.;; as #&d&*'t!n '#c&, )hch h!)&v&#, as stat&d $nd&# 'a#a%#a'h 9 !( th& sa*& c!*'+ant, th& #&d&*'t!n *!n&-)as th& t!ta+ "an6 c+a* !( P<,>>.9 '+$s +a)($+ nt&#&st and !th&# a++!)a"+& &/'&ns&s ncd&nt

t! th& (!#&c+!s$#& '#!c&&dn%s. Th$s, th& !((&# )as &v&n v&#- *$ch +!)&# than th& '#c& 'ad "- '&tt!n&# as th& h%h&st "dd&# n th& a$ct!n sa+&.

In BPI Fa*+- Savn%s Ban6, Inc. vs. 7&+!s! ﾧ, )& h&+d that th& %&n&#a+ #$+& n #&d&*'t!n sthat t s n!t s$((c&nt that a '&#s!n !((&#n% t! #&d&&* *an(&sts hs d&s#& t! d! s!. Th& stat&*&nt!( nt&nt!n *$st "& acc!*'an&d "- an act$a+ and s*$+tan&!$s t&nd&# !( 'a-*&nt. Ths c!nstt$t&sth& &/&#cs& !( th& #%ht t! #&'$#chas&.

C. W'a# is #o *e paid

CINA BANING CORPORATION vs. ON. COURT OF APPEALS, PAULINO ROASCUA and IANG MING CU CUAG.R. N!. 9<>>, S&'t&*"&# , <;;9

Facts:B- v#t$& !( an adv&#s& d&cs!n n a cas&, &ntt+&d @M&t#!'!+tan Ban6 and T#$st C!*'an-

v. Pac(c M$+t C!**&#ca+ C!#'!#at!n and A+(!ns! R!/as Ch$a,@ th& #&sd&nta+ +and 1TCT N!.>9;;2 n th& na*& !( s'!$s&s A+(!ns! R!/as Ch$a and an% Mn% Ch$ Ch$a )as +&v&d !n&/&c$t!n. an% Mn% Ch$ Ch$a (+&d an act!n 0$&st!nn% th& +&v- !n th& %#!$nd that th& +and)as c!n$%a+ 'a#tn&#sh' '#!'&#t-. Ths #&s$+t&d n a c!*'#!*s& a%#&&*&nt t! th& &((&ct that th&+&v- sha++ "& va+d !n+- t! th& &/t&nt !( th& sha#& '&#tann% t! A+(!ns! R!/as Ch$a. A(t&# th&

&/&c$t!n sa+&, a c&#t(cat& !( sa+& )as &/&c$t&d n (av!# !( M&t#!"an6, th& $d%*&nt c#&dt!#, andth& sa*& )as ann!tat&d !n TCT N!. >9;; !n D&c&*"&# <<, 9.

M&an)h+&, Chna Ban6n% C!#'!#at!n (+&d a c!*'+ant (!# s$* !( *!n&- a%anst Pac(cM$+t A%#!=Ind$st#a+ C!#'!#at!n and A+(!ns! R!/as Ch$a. On N!v&*"&# , 9, $d%*&nt )as#&nd&#&d !#d&#n% d&(&ndants t! 'a- Chna"an6 th& a%%#&%at& a*!$nt !( P<,;;,;;;.;; '+$snt&#&sts, '&na+t&s and att!#n&-Hs (&&s. D&(&ndants a''&a+&d t! th& C!$#t !( A''&a+s "$t th& sa*&)as ds*ss&d (!# (a+$#& t! (+& a''&++antsH "#&(. Th$s, n!tc& !( +&v- !n &/&c$t!n )as ss$&d !nF&"#$a#- >, 99 a%anst th& #%ht and nt&#&st !( A+(!ns! R!/as Ch$a n th& #&sd&nta+ +and 1TCT N!. >9;;2. Th& sa*& )as +at&# s!+d at '$"+c a$ct!n and a c&#t(cat& !( sa+& )as &/&c$t&d n(av!# !( Chna"an6, and nsc#"&d !n TCT >9;; !n Ma- >, 9<.

P#&v!$s+-, h!)&v&#, !n N!v&*"&# <9, 9, A+(!ns! R!/as Ch$a &/&c$t&d n (av!# !( hss!n, Pa$+n! R!/as Ch$a, an @Ass%n*&nt !( R%ht t! R&d&&*,@ '&#tann% t! hs #%ht t! #&d&&*th& $ndvd&d '!#t!n !( th& +and s!+d t! M&t#!"an6. On Jan$a#- 99, 9, Pa$+n! #&d&&*&d th& '#!'&#t- (#!* M&t#!"an6. On Ma#ch 9>, 9, th& Ass%n*&nt !( R%ht t! R&d&&* and th&#&d&*'t!n "- Pa$+n! R!/as Ch$a !( th& '#!'&#t- (#!* M&t#!"an6 )&#& ann!tat&d !n TCT N!.>9;;.

P#vat& #&s'!nd&nts Pa$+n! R!/as Ch$a and an% Mn% Ch$ Ch$a (+&d a cas&, a++&%n%that Pa$+n! has a '#!# and "&tt&# #%ht !v&# Chna"an6 nas*$ch as th& ass%n*&nt t! h* !( th&#%ht t! #&d&&* and hs #&d&*'t!n !( A+(!ns!Hs sha#& n th& '#!'&#t- )&#& nsc#"&d !n th& tt+& !n

an &a#+&# dat& than th& ann!tat!n !( th& n!tc& !( +&v- and c&#t(cat& !( sa+& n (av!# !( Chna"an6.B!th th& t#a+ c!$#t and th& C!$#t !( A''&a+s #$+&d n (av!# !( '#vat& #&s'!nd&nts and &n!n&dChna"an6, th& Sh&#(( !( Man+a and th& R&%st&# !( D&&ds !( San J$an (#!* ca$sn% th& t#ans(&# !( '!ss&ss!n, !)n&#sh' and c&#t(cat& !( tt+&, !# !th&#)s& ds'!sn% !( th& '#!'&#t- c!v&#&d "-TCT N!. >9;; n (av!# !( Chna"an6 !# an- !th&# '&#s!n.

Iss$&:3h&th&# !# n!t th& c!nv&-anc& !( th& '#!'&#t- n 0$&st!n t! Pa$+n! R!/as Ch$a )as d!n&

(!# va+$a"+& c!nsd&#at!n and n %!!d (ath.

http://www.chanrobles.com/scdecisions/jurisprudence2004/aug2004/141974.php

http://www.chanrobles.com/scdecisions/jurisprudence2004/aug2004/141974.php




&1

SC R$+n%:&s, t )as d!n& (!# va+$& and n %!!d (ath.

A#tc+& 9 !( th& Cv+ C!d& '#!vd&s that a+&nat!ns *ad& "- a d&"t!# "- %#at$t!$s tt+&a#& '#&s$*&d (#a$d$+&nt )h&n th& d!n!# dd n!t #&s&#v& s$((c&nt '#!'&#t- t! 'a- hs !$tstandn%

d&"ts. L6&)s&, a+&nat!ns "- !n&#!$s tt+& a#& '#&s$*&d (#a$d$+&nt )h&n *ad& "- '&#s!ns a%anst)h!* s!*& $d%*&nt has "&&n #&nd&#&d !# s!*& )#t !( attach*&nt has "&&n ss$&d. Th&s&,h!)&v&#, a#& *&#& '#&s$*'t!ns )hch a#& n n! )a- c!nc+$sv&. Th& '#&s$*'t!n !( (#a$d can "&!v&#th#!)n "- &vd&nc& sh!)n% that th& c!nv&-anc& )as *ad& n %!!d (ath and (!# a s$((c&ntand va+$a"+& c!nsd&#at!n. In th& cas& at "a#, '#vat& #&s'!nd&nts s$((c&nt+- &sta"+sh&d that th& c!nv&-anc& )as *ad& n%!!d (ath and (!# va+$a"+& c!nsd&#at!n. Pa$+n! *antans that h& had n! 6n!)+&d%& !( hs (ath&# A+(!ns!Hs (nanca+ '#!"+&* )th '&tt!n&# Chna"an6 $nt+ h& )as a"!$t t! ca$s& th& canc&++at!n!( TCT N!. >9;;. F$#th&#*!#&, h& 'ad th& s$* !( P9;;,;;;.;; t! A+(!ns! (!# th& #%ht t!#&d&&*, and 'ad th& #&d&*'t!n a*!$nt !( P9,>,. t! M&t#!"an6.

E/'&ct&d+-, '&tt!n&# #&($t&s th&s&, sa-n% that th& a*!$nts 'ad "- Pa$+n! )&#& %#!ss+-ds'#!'!#t!nat& t! th& #%ht t! #&d&&* th& '#!'&#t-, )hch s a #&sd&nta+ h!$s& and +!t +!cat&d n N!#th G#&&nh++s, San J$an, M&t#! Man+a. B$t as c!##&ct+- '!nt&d !$t "- '#vat& #&s'!nd&nts, th&a*!$nt !( P9;;,;;;.;; 'ad "- Pa$+n! t! A+(!ns! )as n!t (!# th& '#!'&#t- ts&+(, "$t *&#&+- (!# th&#%ht t! #&d&&* th& sa*&. As a *att&# !( (act, Pa$+n! st++ had t! 'a- M&t#!"an6 th& #&d&*'t!n '#c& !( P9,>,.. 3h&th&# !# n!t th& +att&# a*!$nt )as ad&0$at& s "&-!nd th& sc!'& !( thsn0$#-. S$((c& t t! stat& that M&t#!"an6 acc&'t&d th& sa*& and #&c!nv&-&d th& '#!'&#t- t!Pa$+n!. M!#&!v&#, !n+- A+(!ns!Hs c!n$%a+ sha#& n th& '#!'&#t- )as a((&ct&d, and th&d&t&#*nat!n !( ts va+$& )as st++ s$"&ct t! +0$dat!n !( d&"ts and cha#%&s a%anst th& c!n$%a+ 'a#tn&#sh'.

E6ec# o/ #ender o/ less #'an p)rc'ase price

BPI >A@I! SAVIN"S BANY- INC vs. SPS. JAN<ARIO ANTONIO VE!OSO AND NATIVIDADVE!OSO".R. No. 131%73- A)g)s# %- $$3

>ac#sOn Jan)ar +- 1%+&- responden# spo)ses o*#ained a loan o/ P1-&$$-$$$ /rom

pe#i#ionerMs predecessorinin#eres# >amil Ban5 and Tr)s# Compan. To sec)repamen# o/ #'e loan- responden# spo)ses e:ec)#ed in /avor o/ #'e *an5 a deed o/

mor#gage over #'ree parcels o/ land- 4i#' improvemen#s- regis#ered in #'eir names)nder TCT Nos. 77- 7+ and 7% o/ #'e Regis#r o/ Deeds o/ L)e;on Ci#.

On >e*r)ar %- 1%+&- responden#s- /or val)e received- e:ec)#ed a promissorno#e /or P1-&$$-$$$. S)*se()en#l- 'o4ever- responden#s de/a)l#ed in #'e mon#'lins#allmen#s d)e on #'eir loan. W'en e6or#s #o )pda#e #'e acco)n# /ailed- >amil Ban5ins#i#)#ed e:#ra8)dicial /oreclos)re proceedings on #'e responden#sM mor#gagedproper#ies.

On J)l 1- 1%+,- #'e proper#ies 4ere sold a# p)*lic a)c#ion 4i#' >amil Ban5 as#'e 'ig'es# *idder /or P-7+-,,3.. On A)g)s# ,- 1%+,- >amil Ban5 assigned all i#srig'#s and in#eres#s in #'e /oreclosed proper#ies #o pe#i#ioner BPI >amil Ban5- Inc.

0BPI2. On A)g)s# +- 1%+,- #'e s'eri6Ms cer#i?ca#e o/ sale 4as regis#ered 4i#' #'eRegis#r o/ Deeds o/ L)e;on Ci#.

On J)l 3- 1%+- responden#s- #'ro)g' co)nsel- 4ro#e BPI o6ering #o redeem#'e /oreclosed proper#ies /or P1-+7-%&,. T'is 4as- 'o4ever- re8ec#ed * pe#i#ioner.

On A)g)s# 7- 1%+- responden#s ?led in #'e RTC o/ L)e;on Ci#- Branc' %3- acomplain# /or ann)lmen# o/ /oreclos)re- 4i#' consigna#ion and praer /or damages. Onmo#ion o/ responden#s- #'e #rial co)r#- in an order da#ed A)g)s# 7- 1%+- allo4edresponden#s #o deposi# 4i#' #'e cler5 o/ co)r# #'e s)m o/ P1-,$$-$$$ represen#ing #'e




&

redemp#ion price. T'erea/#er- #rial on #'e meri#s ens)ed.

Iss)eDid responden# spo)ses compl 4i#' all #'e re()iremen#s /or #'e redemp#ion o/ #'es)*8ec# proper#iesK

SC R)lingWe ans4er in #'e nega#ive.

T'e general r)le in redemp#ion is #'a# i# is no# s)=cien# #'a# a person o6ering #oredeem mani/es#s 'is desire #o do so. T'e s#a#emen# o/ in#en#ion m)s# *eaccompanied * an ac#)al and sim)l#aneo)s #ender o/ pamen#. T'is cons#i#)#es #'ee:ercise o/ #'e rig'# #o rep)rc'ase.

In several cases decided * #'e Co)r# 4'ere #'e rig'# #o rep)rc'ase 4as 'eld #o'ave *een properl e:ercised- #'ere 4as an )ne()ivocal #ender o/ pamen# /or #'e /)llamo)n# o/ #'e rep)rc'ase price. O#'er4ise- #'e o6er #o redeem is ine6ec#)al. Bona?de redemp#ion necessaril implies a reasona*le and valid #ender o/ #'e en#ire

rep)rc'ase price- o#'er4ise #'e r)le on #'e redemp#ion period ?:ed * la4 can easil*e circ)mven#ed.

Conse()en#l- in #'is case- #'e o6er * responden#s on J)l 3- 1%+ #o redeem#'e /oreclosed proper#ies /or P1-+7-%&, and #'e s)*se()en# consigna#ion in co)r# o/ P1-,$$-$$$ on A)g)s# 7- 1%+- 4'ile made 4i#'in #'e period o/ redemp#ion- 4asine6ec#ive since #'e amo)n# o6ered and ac#)all consigned no# onl did no# incl)de#'e in#eres# *)# 4as in /ac# also 4a *elo4 #'e P-7+-,,3. paid * #'e 'ig'es#*idderUp)rc'aser o/ #'e proper#ies d)ring #'e a)c#ion sale.

In Bodiongan vs. Co)r# o/ Appeals- 4e 'eldIn order #o e6ec# a redemp#ion- #'e 8)dgmen# de*#or m)s# pa #'e p)rc'aser

#'e redemp#ion price composed o/ #'e /ollo4ing 012 #'e price 4'ic' #'ep)rc'aser paid /or #'e proper#9 02 in#eres# o/ 1 per mon#' on #'e p)rc'aseprice9 0&2 #'e amo)n# o/ an assessmen#s or #a:es 4'ic' #'e p)rc'aser ma'ave paid on #'e proper# a/#er #'e p)rc'ase9 and 032 in#eres# o/ 1 per mon#'on s)c' assessmen#s and #a:es : : :.

>)r#'ermore- Ar#icle 11 o/ #'e Civil Code o/ #'e P'ilippines provides T'e vendor canno# avail 'imsel/ o/ #'e rig'# #o rep)rc'ase 4i#'o)# re#)rning #o#'e vendee #'e price o/ #'e sale : : :.I# is no# di=c)l# #o )nders#and 4' #'e redemp#ion price s'o)ld ei#'er *e /)ll

o6ered in legal #ender or else validl consigned in co)r#. Onl * s)c' means can #'ea)c#ion 4inner *e ass)red #'a# #'e o6er #o redeem is *eing made in good /ai#'.

D. E6ec# o/ Dea#' o/ @or#gagorPlease re/er #o Jaco* vs. CA 0case ci#ed )nder E6ec#s2

E. Remedies o/ @or#gagee in E()i#a*le @or#gage W'ere a con#rac# p)rpor#ing #o *e a pac#o de re#ro sale is in reali# a loan 4i#'

e()i#a*le mor#gage- #'e vendor can de/ea# #'e con#rac# * resor#ing #o an o/ #'e/ollo4ing remedies 012 * *ringing an ac#ion /or re/orma#ion o/ #'e ins#r)men# in#o aloan 4i#' e()i#a*le mor#gage9 02 * alleging as a de/ense #'a# #'e real in#en#ion o/ #'epar#ies 4as a loan 4i#' e()i#a*le mor#gage- 4'ic' in e6ec#- is /or #'e re/orma#ion o/ #'e ins#r)men#9 and 0&2 * 8)dicial o*8ec#ion or opposi#ion #o #'e regis#ra#ion o/ #'e

a=davi# or consolida#ion o/ o4ners'ip on #'e gro)nd #'a# #'e real in#en#ion o/ #'epar#ies 4as a loan 4i#' e()i#a*le mor#gage.

ooOoo

ANTICHRESIS

Ar#icles 1& G 1&%I. Concep#




&&

- I# is a real rig'# es#a*lis'ed #o sec)re #'e per/ormance o/ an o*liga#ion and 4'ere* #'e 'older ac()ires #'e rig'# #o receive #'e /r)i#o/ an immova*le 4i#' #'e o*liga#ion #o appl #'em #o #'e pamen# o/ #'e in#eres#- i/ o4ing and #'erea/#er #o #'e principal o/ #'ecredi#. ZAr#. 1&[

A. Similari#ies and Di6erences 4i#' Real Es#a#e @or#gagea. Similari#ies

- *o#' are indivisi*le

-#'e ma *e cons#i#)#ed * #'e de*#or or a s#ranger

- #'e m)s# *e cons#i#)#ed on immova*le 0*)# #'ese m)s# *e /r)i#*earing in an#ic'resis2- *o#' ma sec)re all 5inds o/ o*liga#ion- *o#' are accessor con#rac#s

*. Di6erences- an#ic'resis gives a rig'# #o #'e /r)i#s- an#ic'resis is per/ec#ed even 4i#'o)# deliver

II. Elemen#sA. Par#ies

- T'e con#rac# o/ an#ic'resis ma *e es#a*lis'ed * one 'aving #'e rig'# #o enc)m*er proper#.

B. O*8ec#- I# ma *e cons#i#)#ed onl on immova*le giving /r)i#s.

C. Ca)sa- T'e same 4i#' #'a# o/ #'e principal o*liga#ion.

D. >ormali#ies- T'e amo)n# o/ #'e principal and #'e in#eres# m)s# *e speci?ed in 4ri#ing9 o#'er4ise #'e con#rac# is void.- I# m)s# *e in a p)*lic ins#r)men# #o a6ec# #'ird persons or recorded i/ #'e proper# involved is regis#ered.

III. E6ec#sA. Rig'#s o/ #'e an#ic're#ic credi#or

a. To receive #'e /r)i#s- appling #'em a# #'eir ac#)al val)e- as o/ #'e #ime o/ #'e applica#ion #o #'e in#eres# and #'e #o #'e

capi#al 0ar#. 1&2- Par#ies ma s#ip)la#e #'a# #'e in#eres# *e compensa#ed * #'e /r)i#s- provided #'a# i/ #'e val)e o/ #'e /r)i#s e:ceed #'e

in#eres# allo4ed * #'e )s)r la4 #'e e:cess s'all appl #o #'e capi#al.-

A provision in #'e con#rac# #'a# #'e /)ll amo)n# o/ #'e inde*#edness m)s# *e re#)rned #o #'e lenders *e/ore #'e *orro4ersco)ld demand #'e re#)rn o/ #'e proper# is con#rar #o an an#ic're#ic con#rac# 4'erein #'e prod)c#s o/ #'e land s'o)ld *eapplied #o #'e in#eres# and #'en #o #'e principal.

*. Rig'# o/ /oreclos)re #'e credi#or does no# ac()ire o4ners'ip o/ #'e immova*le /or nonpamen# o/ #'e de*#.

- A con#rar s#ip)la#ion is void.- T'e credi#or ma as5 #'e co)r# /or #'e sale o/ #'e proper#- s)*8ec# #o #'e /oreclos)re o/ mor#gages.

B. O*liga#ions o/ #'e an#ic're#ic credi#ora. To *ear necessar e:penses

- T'ese are ded)c#i*le /rom #'e /r)i#s

*. To pa #a:es and ca!"es #$%n &e es&a&e

1. Reason- O#'er4ise #'e de*#or co)ld deprive #'e credi#or o/ #'e sec)ri# * no# paing #a:es and ca)sing /or/ei#)re.

. E:cep#ion- W'en #'e con#rar is s#ip)la#ed

&. E6ec# o/ non/)l?llmen#- T'e credi#or is lia*le /or damages.- T'ese #a:es and c'arges are ded)c#i*le /rom #'e /r)i#s.

Case

D'e"% vs. Fe!nand%109 Phil. 143, August 25, 1960

>ac#sDe/endan# >ernando e:ec)#ed a deed o/ mor#gage in /avor o/ #'e plain#i6 over #4o parcels o/ land #o sec)re a loan o/

#4o #'o)sand 4i#'o)# in#eres# paa*le 4i#'in /o)r ears. T'e possession o/ #'e mor#gaged proper#ies 4as #)rned over #o #'emor#gagee. T'e de/endan# 'aving /ailed #o pa #'e loan a/#er /o)r ears- #'e plain #i6 made several demands /or pamen#4'ic' 4ere )n'eeded. Plain#i6 ?led #'is ac#ion /or /oreclos)re o/ mor#gage. De/endan# arg)es #'a# #'e #r)e #ransac#ion 4as oneo/ an#ic'resis- and #'a# as plain#i6 'as received several cavans o/ pala- /rom #'e mor#gaged proper#ies- val)ed a# P,-$$- 'isde*# 'as alread *een paid. T'e #rial co)r# /o)nd #'e #ransac#ion #o *e a mor#gage- and possession o/ #'e mor#gagee o/ #'e

proper#ies did no# al#er #'e #ransac#ion. De/endan# appealed.

Iss)eW'e#'er or no# #'e con#rac# is one o/ mor#gage or an#ic'resis.

SC R)lingI# is no# an essen#ial re()isi#e o/ a mor#gage #'a# possession o/ #'e mor#gaged premises *e re#ained * #'e

mor#gagor. To *e an an#ic'resis- i# m)s# *e e:pressl agreed *e#4een #'e credi#or and #'e de*#or #'a# #'e /ormer - 'aving *eengiven possession o/ #'e mor#gaged proper#iesd- is #o appl #'eir /r)i#s #o #'e pamen# o/ #'e in#eres#- i/ o4ing- and #'erea/#er #o#'e principal o/ 'is credi#9 so #'a# i/ a con#rac# o/ loan 4i#' sec)ri# does no# s#ip)la#e #'e pamen# o/ in#eres# *)# provides /or#'e deliver o/ #'e mor#gaged proper# #o credi#orin order #'a# #'e la##er ma ga#'er i#Ms /r)i#s- 4i#'o)# s#a#ing #'a# said /r)i#sare #o *e applied #o #'e pamen# o/ in#eres#- i/ an and a/#er4ards #'a# o/ #'e principal- #'e con#rac# is mor#gage and no# anan#ic'resis.

T'e con#rac#- #'ere/ore- is #r)e mor#gage and no# an an#ic'resis. T'is concl)sion 'o4ever- does no# mean #'a# #'eplain#i6 'aving received #'e /r)i#s o/ said proper#ies- 4ill *e allo4ed #o appropria#e #'em /or 'imsel/ and no# *e re()ired #o




&3

acco)n# /or #'em #o #'e de/endan#. T'e #r)e possession o/ #'e plain#i6 )nder #'e con#rac# is a mor#gage in possession or one4'o 'as ac()ired ac#)al or cons#r)c#ive possession o/ #'e premises mor#gaged #o 'im- s#anding )pon 'is rig'#s as a mor#gageeand no# claiming )nder ano#'er #i#le- /or #'e p)rpose o/ en/orcing 'is sec)ri# )pon 'is proper# or ma5ing i#s income 'elp #opa #'e de*#. As s)c' mor#gagee in possession 'is rig'#s and o*liga#ions are similar #o #'ose o/ an an#ic're#ic credi#or.

In #'e presen# case- #'e par#ies 'aving agreed #'a# #'e loan 4as #o *e 4i#'o)# in#eres# and #'e appellan# no# 'avinge:pressl 4aived 'id rig'# #o #'e /r)i#s o/ #'e mor#gaged proper#ies d)ring #'e credi#ors possession- #'e la##er li5e anan#ic're#ic credi#or- m)s# acco)n# /or #'e val)e o/ #'e /r)i#s received * 'im and ded)c# i# /rom #'e loan o*#ained * #'e

appellan#.ooOoo

CHATTE! @ORT"A"E

Ar#icles 13$ G 131I. Concep#

- Ar#. 13$ * a c'a##el mor#gage- personal proper# is recorded in #'e C'a##el @or#gage Regis#er as a sec)ri# /or #'e per/ormance o/ an o*liga#ion. I/ #'e mova*le- ins#ead o/ *eing recorded- is delivered #o #'e credi#or or a #'ird person- #'e con#rac# is a pledge and no#a c'a##el mor#gage.

II. Na#)re and C'arac#eris#icsA. O*liga#ions #'a# ma *e sec)red- T'e m)s# *e cons#i#)#ed #o sec)re /)l?llmen# o/ a principal o*liga#ion.

o T'e ma sec)re all 5inds o/ o*liga#ion- p)re or condi#ionalo T'e principal o*liga#ion ma *e /)#)re *)# #'e sec)ri# o*liga#ion does no# come in#o e:is#ence )n#il #'e principal does.o T'e principal o*liga#ion ma *e na#)ral- voida*le or )nen/orcea*le- provided #'e /ac# is 5no4n #o #'e pledgor or mor#gagor.

- T'ese con#rac#s can *e cons#i#)#ed onl * #'e a*sol)#e o4ner o/ #'e #'ing pledged or mor#gaged.- T'e one cons#i#)#ing #'e pledge or mor#gage s'o)ld 'ave /ree disposal o/ #'e proper# or s'o)ld *e legall a)#'ori;ed /or #'e

p)rpose.- T'ing pledged or mor#gaged ma *e aliena#ed a# #'e ins#ance o/ #'e credi#or /or pamen# o/ #'e principal o*liga#ion.- Pledge and mor#gage are indivisi*le- even i/ #'e principal de*# is divided.

Case

Ac(e )%e* R#bbe! and P+as&'c C%!$. vs. CA260 SCA !14, August 22, 1996

>ac#sPe#i#ioner con#rac#ed a #'ree million peso loan /rom Prod)cers Ban5 sec)red * a c'a##el mor#gage. A provision o/ #'e

c'a##el mor#gage agreemen# 4as #o #'e e6ec#

In case #'e @ORT"A"OR e:ec)#es s)*se()en# promissor no#e or no#es ei#'er as a rene4al o/ #'e /ormerno#e- as an e:#ension #'ereo/- or as a ne4 loan- or is given an o#'er 5ind o/ accommoda#ion s)c' as overdra/#s- le##ers o/ credi#- accep#ances and *ills o/ e:c'ange- releases o/ impor# s'ipmen#s on Tr)s# receip# e#c. #'is mor#gage s'all also s#and as asec)ri# /or #'e pamen# o/ #'e said promissor no#e or no#es or accommoda#ions 4i#'o)# #'e necessi# o/ e:ec)#ing a ne4con#rac# and #'is mor#gage s'all 'ave #'e same /orce and e6ec# as i/ #'e said promissor no#e or no#esaccommoda#ions 4ere e:is#ing on #'e da#e #'ereo/. T'is mor#gage s'all also s#and as sec)ri# /or said o*liga#ions andan and all o#'er o*liga#ions o/ #'e @ORT"A"OR #o #'e @ORT"A"EE o/ 4'a#ever 5ind and na#)re- 4'e#'er s)c' o*liga#ions'ave *een con#rac#ed *e/ore- d)ring or a/#er #'e cons#i#)#ion o/ #'is mor#gage

Pe#i#ioner o*#ained /rom #'e *an5 addi#ional ?nancial accommoda#ions. T'ese *orro4ing 4ere on d)e da#e also /)ll paid.!a#er- #'e *an5 e# again e:#ended #o pe#i#ioner loan o/ one million pesos covered * /o)r promissor no#es. D)e #o ?nancialcons#rain#s- #'e loan 4as no# se##led a# ma#)ri#. Responden# *an5 #'ere)pon ini#ia#ed /oreclos)re proceeding. <l#ima#el- #'eco)r# ordered #'e /oreclos)re o/ #'e c'a##el mor#gage. I# 'eld pe#i#ioner *o)nd * #'e s#ip)la#ions a/ore()o#ed- o/ #'e c'a##elmor#gage.

SC R)ling

Con#rac#s o/ sec)ri# are ei#'er personal or real. In con#rac#s o/ personal sec)ri#- s)c' as g)aran# or a s)re#s'ip-#'e /ai#'/)l per/ormance o/ #'e o*liga#ion * #'e principal de*#or is sec)red * #'e personal commi#men# o/ ano#'er. Incon#rac#s o/ real sec)ri#- s)c' as pledge- mor#gage- or an#ic'resis- #'a# /)l?llmen# is sec)red * an enc)m*rance o/ #'eproper#in pledge- #'e placing o/ mova*le proper# in #'e possession o/ #'e credi#or in c'a##el mor#gage- * e:ec)#ion o/ #'ecorresponding deed s)*s#an#iall in #'e /orm prescri*ed * la49 in real es#a#e mor#gage- * #'e e:ec)#ion o/ a p)*licins#r)men# enc)m*ering #'e real proper# covered #'ere*9 and in a#ec'resis- * a 4ri##en ins#r)men# gran#ing #o #'e credi#or#'e rig'# #o receive #'e /r)i#s o/ an immova*le proper# 4i#' #'e o*liga#ion #o appl s)c' /r)i#s #o #'e pamen# o/ in#eres#- i/ o4ing and #'erea/#er #o #'e principal o/ 'is credi#)pon #'e essen#ial condi#ion #'a# i/ #'e principal o*liga#ion *ecomes d)e and#'e de*#or de/a)l#s- #'en #'e proper# enc)m*ered can *e aliena#ed /or #'e pamen# o/ #'e o*liga#ion- *)# #'a# s'o)ld #'eo*liga#ion *e /)ll paid- #'en #'e con#rac# is a)#oma#icall e:#ing)is'ed proceeding /rom #'e accessor c'arac#er o/ #'eagreemen#. As #'e la4 so p)#s i#- once #'e o*liga#ion is complied 4i#'- #'en #'e con#rac# o/ sec)ri# *ecomes ipso /ac#o n)lland void.

W'ile a pledge- real es#a#e mor#gage- or an#ic'resis ma e:cep#ionall sec)re a/#erinc)rred o*liga#ion so long as#'ese /)#)re de*#s are acc)ra#el descri*ed- a c'a##el mor#gage 'o4ever- can onl cover o*liga#ions e:is#ing a# #'e #ime #'emor#gage is cons#i#)#ed. Al#'o)g' a promise e:pressed in #'e c'a##el mor#gage #o incl)de de*#s #'a# are e# #o *e con#rac#edcan *e a *inding commi#men# #'a# can *e compelled )pon- #'e sec)ri# i#sel/- 'o4ever- does no# come in#o e:is#enceor arise

)n#il a/#er a c'a##el mor#gage agreemen# covering #'e ne4l con#rac#ed de*# is e:ec)#ed ei#'er * concl)ding a /res' c'a##elmor#gageor * amending #'e old con#rac# con/orma*l 4i#' #'e /orm prescri*ed * #'e C'a##el @or#gage !a4. Re/)sal on #'epar# o/ #'e *orro4er #o e:ec)#e #'e agreemen# so as #o cover #'e a/#erinc)rred o*liga#ion can cons#i#)#e as an ac# o/ de/a)l# on#'e par# o/ #'e *orro4er o/ #'e ?nancing agreemen# 4'erein #'e promise is 4ri##en- *)# o/ co)rse #'e remed o/ /oreclos)re canonl cover #'e de*#s e:#an# a# #'e #ime o/ cons#i#)#ion and d)ring #'e li/e o/ #'e c'a##el mor#gage so)g'# #o *e /oreclosed.

T'e signi?cance o/ #'e r)ling #o #'e ins#an# pro*lem 4o)ld *e #'a# since #'e 1%7+ c'a##el mor#gage 'as ceased #oe:is# coinciden#all 4i#' #'e /)ll pamen# o/ #'e P&-$$$-$$$.$$ loan.- #'ere no longer 4as an c'a##el mor#gage #'a# co)ldcover #'e ne4 loans #'a# 4ere concl)ded #'erea/#er.

B. Elemen#sA. Par#ies

- T'e mor#gagor m)s# 'ave capaci# #o enc)m*er #'e proper#.




&,

B. O*8ec#- I# ma onl *e cons#i#)#ed on mova*le proper#.

o T'is ma incl)de In#eres# in a *)siness <nga#'ered crops Vessels

Cer#i?ca#es o/ s#oc5s !arge ca##le S#oc5 in #rade

o A c'a##el mor#gage over immova*les is void. E:cep#ion i/ #'e par#ies agree on cons#i#)#ing #'e c'a##el mor#gage over an immova*le- *)# i# 4ill no# *ind #'ird

par#ies.

Cases

,ana!an" vs. O-+ada99 Phil.10", #a$ 1", 1956

>ac#s@anarang o*#ained a $$ loan /rom Es#e*an and #o sec)re pamen# s'e e:ec)#ed a c'a##el mor#agage over a 'o)se

o/ mi:ed ma#erials. >or nonpamen# o/ #'e loan- 8)dgmen# 4as rendered agains# @anarang and e:ec)#ion 4as iss)ed agains##'e proper# mor#gaged. Be/ore #'e proper# co)ld *e sold- @anarang o6ered #o pa #'e amo)n# o/ #'e 8)dgmen# 4i#' in#eres#*)# re/)sed #o pa #'e p)*lica#ion e:penses o/ #'e no#ice o/ sale in #'e #4o ne4spapers.

SC R)ling T'ere can *e no ()es#ion #'a# a *)ilding o/ mi:ed ma#erials ma *e s)*8ec# o/ a c'a##el mor#gage- in 4'ic' case i# is

considered as *e#4een #'e par#ies a personal proper#. B)# #'is does no# ma5e #'is 'o)se a personal proper# /or #'e p)rposeo/ #'e no#ice #o *e given /or i#s sale a# p)*lic a)c#ion. Sales on e:ec)#ion a6ec# #'e p)*lic and #'ird persons. T'e reg)la#ionsgoverning sales on e:ec)#ion are /or p)*lic o=cials #o /ollo4. T'e /orm o/ #'e proceedings prescri*ed /or eac' 5ind o/ proper#is s)i#ed #o i#s c'arac#er- no# #o #'e c'arac#er 4'ic' #'e par#ies 'ave given #o i# or desire #o give i#.

ooOoo

U,ALAD /. /ICE0CIO41 SCA 143

>ac#sVicencio and Simeon e:ec)#ed a c'a##el mor#gage in /avor o/ plain#i6s T)malad over #'eir 'o)se- 4'ic' 4as

*eing ren#ed * @adrigal and compan. T'is 4as e:ec)#ed #o g)aran#ee a loan- paa*le in one ear 4i#' a 1 perann)m in#eres#.

T'e mor#gage 4as e:#ra8)diciall /oreclosed )pon /ail)re #o pa #'e loan. T'e 'o)se 4as sold a# a p)*lic a)c#ion and#'e plain#i6s 4ere #'e 'ig'es# *idder. A corresponding cer#i?ca#e o/ sale 4as iss)ed. T'erea/#er- #'e plain#i6s ?led anac#ion /or e8ec#men# agains# #'e de/endan#s- praing #'a# #'e la##er vaca#e #'e 'o)se as #'e 4ere #'e proper o4ners.

SC R)lingCer#ain devia#ions 'ave *een allo4ed /rom #'e general doc#rine #'a# *)ildings are immova*le proper# s)c' as

4'en #'ro)g' s#ip)la#ion- par#ies ma agree #o #rea# as personal proper# #'ose * #'eir na#)re 4o)ld *e real proper#. T'is is par#l *ased on #'e principle o/ es#oppel 4'erein #'e principle is predica#ed on s#a#emen#s * #'e o4ner declaring 'is'o)se as c'a##el- a cond)c# #'a# ma conceiva*l s#op 'im /rom s)*se()en#l claiming o#'er4ise.

In #'e case a# *ar- #'o)g' #'ere *e no speci?c s#a#emen# re/erring #o #'e s)*8ec# 'o)se as personal proper#- e# *ceding- selling or #rans/erring a proper# #'ro)g' c'a##el mor#gage co)ld onl 'ave mean# #'a# de/endan# conves #'e'o)se as c'a##el- or a# leas#- in#ended #o #rea# #'e same as s)c'- so #'a# #'e s'o)ld no# no4 *e allo4ed #o ma5ean inconsis#en# s#and * claiming o#'er4ise.

ooOoo

,aa&' Leas'n" and F'nance C%!$. vs. ea!eve! e&'+e ,'++s* Inc.122 SCA 296, #a$ 16, 19"3

>ac#sIn order #o o*#ain ?nancial accommoda#ions /rom 'erein pe#i#ioner @a5a#i !easing and >inance Corpora#ion- #'e

priva#e responden# Wearever Te:#ile @ills- Inc. disco)n#ed and assigned several receiva*les 4i#' #'e /ormer )nder a Receiva*leP)rc'ase Agreemen#. To sec)re #'e collec#ion o/ #'e receiva*les assigned- priva#e responden# e:ec)#ed a c'a##el mor#gageover cer#ain ra4 ma#erials inven#or as 4ell as mac'iner descri*ed as an Ar#os Aero Drer S#en#ering Range.

SC R)ling

I/ a 'o)se o/ s#rong ma#erials- li5e 4'a# 4as involved in T)mald vs. Vicencio 31 SCRA 13&- ma *e considered aspersonal proper# /or p)rposes o/ e:ec)#ing a c'a##el mor#gage #'ereon as long as #'e par#ies #o #'e con#rac# so agree and noinnocen# #'ird par# 4ill *e pre8)diced #'ere* #'ere is a*sol)#el no reason 4' a mac'iner- 4'ic' is mova*le in i#s na#)reand *ecomes immo*ili;ed onl * des#ina#ion or p)rpose- ma no# *e li5e4ise #rea#ed as s)c'. T'is is reall *eca)se one 4'o'as agreed is s#opped /rom dening #'e e:is#ence o/ #'e c'a##el mor#gage.

In re8ec#ing pe#i#ionerMs asser#ion on #'e applica*ili# o/ #'e T)malad doc#rine- #'e Co)r# o/ Appeals la s#ress on #'e/ac# #'a# #'e 'o)se involved #'erein 4as *)il# on a land #'a# did no# *elong #o #'e o4ner o/ s)c' 'o)se. B)# #'e la4 ma5es nodis#inc#ion 4i#' respec# #o #'e o4ners'ip o/ #'e land on 4'ic' #'e 'o)se is *)il# and 4e s'o)ld no# la do4n dis#inc#ion no#con#empla#ed * la4.

I# m)s# *e poin#ed o)# #'a# #'e c'arac#eri;a#ion o/ #'e s)*8ec# mac'iner as c'a##el * #'e priva#e responden# isindica#ive o/ in#en#ion and impress )pon #'e proper# #'e c'arac#er de#ermined * #'e par#ies. As s#a#ed in S#andard Oil Co. o/ Ne4 or5 vs. Jaramillo- 33 P'il. &$- i# is )ndenia*le #'a# #'e par#ies #o a con#rac# ma * agreemen# #rea# as personal proper##'a# 4'ic' * na#)re 4o)ld *e real proper# as long as no in#eres# o/ #'ird par#ies 4o)ld *e pre8)diced.




&

C. Ca)sa- Same 4i#' #'e principal o*liga#ion.

D. >orma. To *ind #'e par#ies

- T'e ins#r)men# need onl con/orm s)*s#an#iall #o #'a# /orm con#ained in sec#ion , o/ Ac# No. 1,$+. 0i# m)s# *e in a p)*licdoc)men#2

S%C&'() 5. *orm. + A hattel mortgage shall be -eeme- to be suient when ma-e substantiall$ in aor-ane with the/ollowing /orm, an- shall be signe- b$ the erson or ersons eeuting the same, in the resene o/ two witnesses, who shallsign the mortgage as witnesses to the eeution thereo/, an- eah mortgagor an- mortgagee, or, in the absene o/ themortgagee, his agent or attorne$, shall mae an- subsribe an a-avit in substane as hereina/ter set /orth, whih a-avit,signe- b$ the arties to the mortgage as above state-, an- the ertiate o/ the oath signe- b$ the authorit$ a-ministering thesame, shall be aen-e- to suh mortgage an- reor-e- therewith.

*. To *ind #'ird persons G addi#ional re()iremen#s1. A=davi# o/ "ood >ai#'

Cases

GIBER)O0 /). UREIDI0I BRO).

>ac#sH.Y. @o#oom)l Co. 4as- a# #'e #ime men#ioned in #'e complain#- a par#ners'ip doing *)siness in #'e ci#ies o/ Ce*)

and Iloilo. Some#ime prior #o @a 3- 1%1- #'e compan *ecame ?nanciall em*arrassed. A.N. J)reidini Bros. Inc.- a largecredi#or o/ @o#oom)l \ Co.- *ecame a4are o/ #'e precario)s condi#ion o/ #'e la##er- *eca)se o/ #'e diminis'ing pamen#s onacco)n# o/ de*#. <l#ima#el- @o#oom)l Co.- delivered #o J)reidini Bro#'ers on @a 3- 1%1- one o/ #'e de*#orMs Iloilo s#ores5no4n as Ba;ar Ag)ila de Oro. On #'e same da also- credi#s receiva*les *elonging #o @o#oom)l Co.- passed #o J)reidiniBros. T'e doc)men#s evidencing #'ese #rans/ers appear in #'e record.

Wi#'in #'ir# das a/#er #'ese assignmen#s 4ere made- or #o *e e:ac#- on J)ne - 1%1- a n)m*er o/ credi#ors o/ #'eH.Y. @o#oom)l Co. ini#ia#ed s)ccess/)ll invol)n#ar insolvenc proceedings agains# i#. !a#er- ac#ion 4as *ro)g'# * #'ereceiver "i*erson appoin#ed * #'e co)r#.

Iss)eWON #'e c'a##el mor#gage 4as valid.

SC R)ling T'e #rial co)r# 'eld- and properl- #'a# E:'i*i# 1 4as invalid *eca)se #'e oa#' re()ired * la4 did no# appear #'erein-

and *eca)se #'e s)*8ec#ma##er 4as no# descri*ed #'erein 4i#' s)=cien# par#ic)lari#. T'e C'a##el @or#gage !a4- in i#s sec#ion,- in descri*ing 4'a# s'all *e deemed s)=cien# #o cons#i#)#e a good c'a##el mor#gage- incl)des #'e re()iremen# o/ ana=davi# o/ good /ai#' appended #o #'e mor#gage and recorded #'ere4i#'. I# 'as *een 'eld * rep)#a*le co)r#s #'a# #'e a*senceo/ #'e a=davi# vi#ia#es a mor#gage as agains# credi#ors and s)*se()en# enc)m*rancers.

ooOoo

ACA /). DA/AO LU,BER CO,PA0Y

>ac#sPlain#i6 <r*ano Jaca- a licensee o/ a logging concession loca#ed in Davao Ci# is engaged in a logging *)siness.

De/endan# Davao !)m*er Compan 0D!C2 is a corpora#ion 4i#' 4'ic' plain#i6s 'ad *)siness dealings covering #'e sales o/ 'islogs.

Some#imes in 1%,3- #'e 'erein par#ies en#ered in#o an agreemen# 4'ere* plain#i6 ma sec)re- * 4a o/ advances- ei#'ercas' or ma#erials- /oods#)6s andUor e()ipmen# /rom #'e de/endan#s. T'e pamen# 4as #o *e made ei#'er in cas' andUorplain#i6Ms #)rning over 'is logs #o #'e de/endan#- and in #'e la##er case- #'e c)rren# price- ei#'er e:por# or domes#ic- o/ #'e logsa# #'e #ime o/ #'eir deliver 4as #o *e considered.

W'ile #'e rela#ions'ip 4as s)*sis#ing- de/endan# made plain#i6 e:ec)#e in i#s /avor a c'a##el mor#gage- a cop o/ 4'ic'ins#r)men#- 'o4ever- plain#i6 4as never /)rnis'ed.

In Novem*er 1%&- plain#i6 ?led 4i#' #'e Davao C>I a complain# /or Acco)n#ing Re#)rn o/ Price Di6eren#ials and Damagesagains# #'e de/endan#s.


SC R)ling T'e de/endan#Ms proo/ o/ in#eres# in #'e proper# is #'e deed o/ c'a##el mor#gage e:ec)#ed * #'e plain#i6 in i#s /avor

on Jan)ar 3- 1%3. T'is deed o/ c'a##el mor#gage is void *eca)se i# provides #'a# #'e sec)ri# s#a#ed #'erein is /or #'epamen# o/ an and all o*liga#ions 'erein *e/ore con#rac#ed and 4'ic' ma 'erea/#er *e con#rac#ed * #'e mor#gagor in/avor o/ #'e mor#gagee. In #'e case o/ elgian Catholi #issionaries vs. #agallanes Press 49 P'7 64!8 #'is co)r# 'eld

A mortgage that ontains a stiulation in regar- to /uture a-vanes in the re-it will tae e:et onl$ /romthe -ate the same are ma-e annot /rom the -ate o/ the mortgage. ;here the statute rovi-es that a arties to ahattel mortgage must tae oath that the -ebt is a <ust -ebt, honestl$ -ue an- owing /rom the mortgagor to the mortgagee, it is obvious that a vali- mortgage annot be ma-e to seure a -ebt to be therea/ter ontrate-=.

T')s- pe#i#ion gran#ed.

ooOoo

CEBU I0ER0AIO0AL FI0A0CE CORPORAIO0 /). COUR OF APPEAL)

>ac#s JD e:ec)#ed a special po4er o/ a##orne in /avor o/ AT- a)#'ori;ing #'e la##er #o sell JDMs cargo vessel. AT sold #'e

vessel #o RO 4'o paid #'e p)rc'ase price * iss)ing c'ec5s. Since #'e pamen# 4as no# made in cas'- i# 4as speci?calls#ip)la#ed in #'e deed o/ sale #'a# #'e vessel s'all no# *e regis#ered #o RO )n#il /)ll pamen#. RO o*#ained possession o/ #'evessel and o*#ained copies o/ #'e )na)#'ori;ed deed o/ sale p)rpor#edl #o *e s'o4n #o #'e *an5 /or loan p)rposes. T'econdi#ion- 'o4ever- 4'ic' 4as 'and4ri##en on #'e original- does no# appear in 'is copies.

RO 'ad 'is copies no#ari;ed and regis#ered #'e sale in #'e P'ilippine Coas# ")ard 4i#'o)# ATMs 5no4ledge. RO 4asiss)ed a Cer#i?ca#e o/ O4ners'ip and Cer#i?ca#e o/ P'ilippine Regis#r #'a# ena*led 'im #o ac()ire a loan a# CI>C 4i#' #'e




&7

vessel as sec)ri#. T'e c'a##el mor#gage 4as d)l regis#ered and anno#a#ed. <pon de/a)l#- CI>C demanded deliver o/ #'evessel- o#'er4ise #'e mor#gage s'all *e /oreclosed or pa #'e *alance. @ean4'ile- #'e c'ec5s 'e iss)ed #o AT *o)nced. JD andAT s)ed /or rescission and replevin 4i#' damages. T'e #rial co)r# r)led #'a# #'e c'a##el mor#gage 4as n)ll an void and orderedCI>C #o pa AT damages. T'e Co)r# o/ Appeals a=rmed #'e decision- 'ence #'is pe#i#ion /or revie4 on cer#iorari.


SC R)ling T'e c'a##el mor#gage is valid and s)*sis#ing. I# s'o)ld no# *e vie4ed in s)c' a mopic con#e:#. T'e 5e lies in #'ecer#i?ca#e o/ o4ners'ip iss)ed in ROMs name. In #'e deed o/ a*sol)#e sale- i# 4as also indica#ed #'a# JD 4as #'e seller and RO4as #'e *)er o/ #'e vessel. Co)pled 4i#' #'e /ac# #'a# #'ere is no evidence o/ an #ransac#ion *e#4een JD or AT and CI>C- i#/ollo4s #'a# CI>C is a credi#ormor#gagee and no# o4nerseller. T'e /orm con#rac# )sed /or simple loan 4i#' c'a##el mor#gage4as ?lled o)# * mis#a5e. I# is no# impro*a*le #'a# s)c' an oversig'# ma 'ave *een commi##ed negligen#l *)# )nin#en#ionalland 4i#'o)# malice.

A mor#gagee 'as a rig'# #o rel in good /ai#' on #'e cer#i?ca#e o/ #i#le o/ #'e mor#gagor #o #'e proper# given as sec)ri# and in#'e a*sence o/ an sign #'a# mig'# aro)se s)spicion #o )nder#a5e /)r#'er inves#iga#ion. Hence- even i/ #'e mor#gagor is no##'e rig'#/)l o4ner o/ or does no# 'ave a valid #i#le #o #'e mor#gaged proper#- #'e mor#gagee or #'e #rans/eree in good /ai#' isnone#'eless en#i#led #o #'e proper#. Al#'o)g' #'is r)le generall per#ains #o real proper#- par#ic)larl regis#ered land- i# maalso *e applied * analog #o personal proper#- in #'is case speci?call- since s'ipo4ners are- li5e4ise re()ired * la4 #oregis#er #'eir vessel 4i#' #'e P'ilippine Coas# ")ard.

T'e special a=davi# o/ good /ai#' is re()ired onl /or #'e p)rpose #rans/orming an alread valid mor#gage in#o apre/erred mor#gage. I# is no# necessar /or #'e validi# o/ #'e c'a##el mor#gage i#sel/.

. Descrip#ion o/ Proper#Cases

)ALDAA /). PIL.GUARA0Y CO.

>ac#s

Elea;ar e:ec)#ed in /avor o/ Salda]a- a c'a##el mor#gage- #'e la# paragrap' o/ 4'ic' s#a#es an- all other /urnitures,tures, or e>uiment /oun- in the sai- remises=. S)*se()en# #o #'e e:ec)#ion o/ said mor#gage- de/endan# Hospi#al de San

J)an de Dios o*#ained a 8)dgmen# agains# Elea;ar. Personal proper#ies o/ Elea;ar 4ere levied )pon. Salda]a ?led a #'irdpar#claim asser#ing #'a# #'e proper#ies levied are s)*8ec# #o 'is c'a##el mor#gage.

Iss)e WON #'ere 4as s)=cien# descrip#ion on #'e proper#ies mor#gaged.

SC R)ling T'ere is meri# in appellan#Ms con#en#ion. Sec#ion 7 o/ #'e C'a##el @or#gage !a4 does no# demand a min)#e and

speci?c descrip#ion o/ ever c'a##el mor#gaged in #'e deed o/ mor#gage *)# onl re()ires #'a# #'e descrip#ion o/ #'e proper#ies*e s)c' as #o ena*le #'e par#ies in #'e mor#gage or an o#'er person- a/#er reasona*le in()ir and inves#iga#ion #o iden#i/#'e same. "a)ged * #'is s#andard- general descrip#ions 'ave *een 'eld valid * #'is co)r#. T'e speci?ca#ion in #'e las#paragrap' o/ #'e deed in #'e ins#an# case is in s)*s#an#ial compliance 4i#' #'e reasona*le descrip#ion r)le ?:ed * #'eC'a##el @or#gage !a4.

T'e limi#a#ion /o)nd in Sec#ion 7- las# paragrap'- o/ #'e C'a##el @or#gage !a4 on li5e or s)*s#i#)#ed proper#iesma5es re/erence #o #'ose #'erea/#er ac()ired * #'e mor#gagor and placed in #'e same deposi#ar as #'e proper# originallmor#gaged no# #o #'ose alread e:is#ing and originall incl)ded a# #'e da#e o/ #'e cons#i#)#ion o/ #'e c'a##el mor#gage. A

con#rar vie4 4o)ld )nd)l impose a more rigid condi#ion #'a# #'e la4 prescri*es 4'ic' is- #'a# #'e descrip#ion *e onl s)c' as#o ena*le iden#i?ca#ion a/#er reasona*le in()ir and inves#iga#ion.

Orders se# aside.

&. Regis#ra#ioni. Place

?eneral ule #'e regis#ries o/ #'e place 4'ere #'e mor#gagor resides and 4'ere #'e proper# is loca#ed. E:cep# #'a# o/ vessels m)s# *e regis#ered in #'e o=ce o/ #'e collec#or o/ c)s#oms o/ #'e por# o/ en#r. @or#gage o/ s'ares o/ s#oc5 m)s# *e regis#ered in #'e province 4'ere #'e corpora#ion 'as i#s principal place o/

*)siness. A mor#gage over an a)#omo*ile- in order #o a6ec# #'ird persons- s'o)ld *e regis#ered no# onl in #'e C'a##el

@or#gage Regis#r *)# also in #'e @o#or Ve'icles O=ce. T'e mor#gageeMs /ail)re #o anno#a#e #'e mor#gage in #'esaid o=ce renders i# ine6ec#ive agains# a p)rc'aser 4'o regis#ers #'e sale in #'e @o#ors Ve'icles O=ce.

C. E6ec# o/ @or#gageA. W'a# i# covers

- T'e mor#gage covers onl #'e proper# descri*ed in #'e con#rac# and e:cl)des li5e or s)*s#i#)#ed proper# #'erea/#er ac()ired-an#'ing in #'e con#rac# #o #'e con#rar no#4i#'s#anding.

a. E:cep#ion- In #'e case o/ s#oc5 con#ained in s#ores- dr)gs#ores- or similar *)sinesses o/ a revolving or oa#ing

na#)re.

D. Disc'arge o/ @or#gage




&+

A. Re()isi#es- T'a# #'ere 'as *een per/ormance or #ender o/ per/ormance o/ #'e condi#ion9- T'a# #'ere 'as *een a re()es# /or #'e disc'arge made * #'e person en#i#led #o redeem.

0'o4 disc'arge is madeK e:ec)#e an a=davi# o/ disc'arge #o *e recorded in #'e regis#r o/deeds2

B. E6ec# o/ /ail)re #o disc'arge 4i#'in #en 01$2 das G #'e mor#gagee is lia*le #o pa #4en# pesos 0P$.$$2 and all

damages occasioned #'ere*

E. Redemp#ion 0*e/ore /oreclos)re2A. W'o ma redeem

- T'e mor#gagor9- S)*se()en# mor#gagees9- S)*se()en# a##ac'ing credi#ors.

B. W'a# m)s# *e paid- T'e principal o*liga#ion and in#eres# #'ereon9- Cos#s and e:penses inc)rred * an *reac'- *e/ore #'e sale.

C. E6ec#s o/ Redemp#ion- T'e redemp#ioner is s)*roga#ed #o #'e rig'#s o/ #'e mor#gagee.

12 He ma- #'ere/ore- /oreclose #'e mor#gage in #'e same manner.

>. >oreclos)reA. Yinds

a. J)dicial*. E:#ra8)dicial

1. REL<ISITESi. Sale a# p)*lic a)c#ion #'ir# das a/#er #'e de*#ors de/a)l# 0i/ #'e de*#or re/)ses #o s)rrender #'e c'a##el- ac#ion m)s#

*e *ro)g'# /or i#s deliver2.ii. No#ice o/ sale #o *e pos#ed in #4o 02 p)*lic places #en 01$2 das *e/ore #'e sale- and no#ice li5e4ise #o *e given #o #'e

mor#gagor in 4ri#ing- personall or * mail.iii. Cond)c#ed * a p)*lic o=cer 0s'eri62.iv. Cond)c#ed in #'e m)nicipali# 4'ere #'e mor#gagor resides OR 4'ere #'e proper# is loca#ed.

%@C%P& 4'en some o#'er place is s#ip)la#ed.

. DISPOSITION O> PROCEEDS

i. Applica#iona2 Cos#s and e:penses o/ sale9*2 T'e principal o*liga#ion and in#eres#9c2 Claims o/ s)*se()en# mor#gagees9d2 T'e *alance- i/ an- #o #'e mor#gagor.

ii. In case o/ de?cienca2 T'e mor#gagee ma s#ill recover #'e de?cienc /rom #'e mor#gagor.

Case

PA,ECA OOD REA,E0 PLA0* Inc. /). CA

>ac#sOn April 17- 1%+$- pe#i#ioner PA@ECA Wood Trea#men# Plan#- Inc. 0PA@ECA2 o*#ained a loan o/ <S\7-++1.7- or #'e

e()ivalen# o/ P-$$$-$$$.$$ /rom responden# Ban5. B vir#)e o/ #'is loan- pe#i#ioner PA@ECA- #'ro)g' i#s Presiden#- pe#i#ionerHerminio C. Teves- e:ec)#ed a promissor no#e /or #'e said amo)n#- promising #o pa #'e loan * ins#allmen#. As sec)ri# /or

#'e said loan- a c'a##el mor#gage 4as also e:ec)#ed over PA@ECAMs proper#ies in D)mag)e#e Ci#- consis#ing o/ inven#ories-/)rni#)re and e()ipmen#- #o cover #'e 4'ole val)e o/ #'e loan.On Jan)ar 1+- 1%+3- and )pon pe#i#ioner PA@ECAMs /ail)re #o pa- responden# *an5 e:#ra8)diciall /oreclosed #'e

c'a##el mor#gage- and- as sole *idder in #'e p)*lic a)c#ion- p)rc'ased #'e /oreclosed proper#ies /or a s)m o/ P&-&,$.$$. On J)ne %- 1%+3- responden# *an5 ?led a complain# /or #'e collec#ion o/ #'e *alance o/ P3-&-&&.3 4i#' Branc' 1& o/ #'eRegional Trial Co)r# o/ @a5a#i Ci# agains# pe#i#ioner PA@ECA and priva#e pe#i#ioners 'erein- as solidar de*#ors 4i#' PA@ECA)nder #'e promissor no#e.

RTC o/ @a5a#i rendered a decision ordering #'e de/endan#s #o pa 8oin#l and severall plain#i6 #'e 012 s)m o/ P3-&-&&.3 represen#ing #'e de?cienc claim o/ #'e la##er as o/ @arc' &1- 1%+3- pl)s 1 in#eres# per ann)m and o#'erc'arges /rom April 1- 1%+3 )n#il #'e 4'ole amo)n# is /)ll paid and 02 #'e cos#s o/ #'e s)i#.

T'e Co)r# o/ Appeals a=rmed #'e RTC decision. Hence- #'is appeal.

Iss)eWON #'e mor#gagor is lia*le #o #'e mor#gagee /or #'e de?cienc.

SC R)lingSec#ion 13 o/ #'e C'a##el @or#gage !a4 provides #'a# #'e mor#gagor is en#i#le #o #'e *alance o/ #'e proceeds- )pon

sa#is/ac#ion o/ #'e principal o*liga#ion and cos#s. Sec#ion 13 provides #'a#

: : : T'e proceeds o/ s)c' sale s'all *e applied #o #'e pamen#- ?rs#- o/ #'e cos#s and e:penses o/ 5eepingand sale- and #'en #o #'e pamen# o/ #'e demand or o*liga#ion sec)red * s)c' mor#gage- and #'e resid)e s'all *epaid #o persons 'olding s)*se()en# mor#gages in #'eir order- and #'e *alance- a/#er paing #'e mor#gage- s'all *epaid #o #'e mor#gagor or persons 'olding )nder 'im on demand.

Since #'e C'a##el @or#gage !a4 *ars #'e credi#ormor#gagee /rom re#aining #'e e:cess o/ #'e sale proceeds #'ere is acorollar o*liga#ion- #'ere/ore- on #'e par# o/ #'e de*#ormor#gager #o pa #'e de?cienc in case o/ a red)c#ion in #'e price a#p)*lic a)c#ion.

As e:plained in #anila &ra-ing an- Sul$ Co. vs. &amaraw Plantation Co., ci#ed in Ablaa vs. 'gnaio, suraW'ile i# is #r)e #'a# sec#ion & o/ Ac# No. 1,$+ provides #'a# ^a c'a##el mor#gage is a condi#ional saleM- i#

/)r#'er provides #'a# i# ^is a condi#ional sale o/ personal proper# as seurit$ /or #'e pamen# o/ a de*#- or /or #'eper/ormance o/ some o#'er o*liga#ion speci?ed #'erein.M T'e lo4er co)r# overloo5ed #'e /ac# #'a# #'e c'a##elsincl)ded in #'e c'a##el mor#gage are onl given as sec)ri# and no# as a pamen# o/ #'e de*#- in case o/ a /ail)re o/ pamen#.




&%

T'e #'eor o/ #'e lo4er co)r# 4o)ld lead #o #'e a*s)rd concl)sion #'a# i/ #'e c'a##els men#ioned in #'emor#gage- given as sec)ri#- s'o)ld sell /or more #'an #'e amo)n# o/ #'e inde*#edness sec)red- #'a# #'e credi#or4o)ld *e en#i#led #o #'e /)ll amo)n# /or 4'ic' i# mig'# *e sold- even #'o)g' #'a# amo)n# 4as grea#l in e:cess o/ #'einde*#edness. S)c' a res)l# cer#ainl 4as no# con#empla#ed * #'e legisla#)re 4'en i# adop#ed Ac# No. 1,$+. T'ereseems #o *e no reason s)ppor#ing #'a# #'eor )nder #'e provision o/ #'e la4. T'e val)e o/ #'e c'a##els c'angesgrea#l /rom #ime #o #ime- and some#imes ver rapidl. I/- /or e:ample- #'e c'a##els s'o)ld grea#l increase in val)eand a sale )nder #'a# condi#ion s'o)ld res)l# in largel overpaing #'e inde*#edness- and i/ #'e credi#or is no#permi##ed #o re#ain #'e e:cess- #'en #'e same #o5en 4o)ld re()ire #'e de*#or #o pa #'e de?cienc in case o/ a

red)c#ion in #'e price o/ #'e c'a##els *e#4een #'e da#e o/ #'e con#rac# and a *reac' o/ #'e condi#ion.We ?nd no reason #o dis#)r* #'e r)ling in A*la;a vs. Ignacio- and #'e cases rei#era#ing i#. T')s- pe#i#ion isDENIED.

iii. In case o/ sale o/ personal proper# on ins#allmen#.Ar#. 13+30NCC2. In a con#rac# o/ sale o/ personal proper# #'e price o/ 4'ic' is paa*le in ins#allmen#s- #'e vendor mae:ercise an o/ #'e /ollo4ing remedies012 E:ac# /)l?llmen# o/ #'e o*liga#ion- s'o)ld #'e vendee /ail #o pa902 Cancel #'e sale- s'o)ld #'e vendeeFs /ail)re #o pa cover #4o or more ins#allmen#s90&2 >oreclose #'e c'a##el mor#gage on #'e #'ing sold- i/ one 'as *een cons#i#)#ed- s'o)ld #'e vendeeFs /ail)re #o pacover #4o or more ins#allmen#s. In #'is case- 'e s'all 'ave no /)r#'er ac#ion agains# #'e p)rc'aser #o recover an)npaid *alance o/ #'e price. An agreemen# #o #'e con#rar s'all *e void.

B. Rig'# o/ Redemp#ionCase Please re/er #o Para vs. Rodrig)e; 0ci#ed in Pledge2

". Dis#inc#ions

PLEDGE CAEL,ORGAGE

REAL E)AE,ORGAGE

A0ICRE)I)

a. As #o OBEC On mova*les On mova*les On immova*les On immova*les

*. As #o

PO))E))IO0

B #'e credi#or B #'e de*#or B #'e de*#or B #'e credi#or

c. As #o

PERFECIO0

Real Con#rac# >ormal Con#rac# >ormal Con#rac# >ormal con#rac#

d. As #o FOR, &%

b'nd '!dPe!s%ns

P)*lic ins#r)men#con#aining descrip#iono/ #'e #'ing pledgedand #'e da#e #'ereo/

Recorded p)*licins#r)men#



ooOoo

CONC<RRENCE AND PRE>ERENCE O> CREDITS

C'ap#er 1 G "eneral Provisions

Ar#icles & G 3$I. Concep# and "eneral T'eor

A. Conc)rrence- Possession * #4o or more credi#ors o/ e()al rig'#s or privileges over #'e same proper# or all o/ #'e proper# o/ #'e de*#or.

B. Pre/erence- Rig'# 'eld * a credi#or #o *e pre/erred in #'e pamen# o/ 'is claim a*ove o#'ers o)# o/ #'e de*#orMs asse#s.- T'e r)les appl 4'en #4o or more credi#ors 'ave separa#e and dis#inc# claims agains# #'e same de*#or 4'o 'as ins)=cien#

proper#.

C. Proper# no# s)*8ec# #o pre/erence and conc)rrenceP!%$e!&7 ee($& 8!%( +'ab'+'&7 8%! 8#+-+(en& %8 %b+'"a&'%n91. Presen# proper# G #'ose provided )nder Ar#s. 1,, and $, o/ #'e >amil Code- Sec. 1&- R)le &% o/ #'e R)les o/ Co)r#- and Sec.

11+ o/ #'e P)*lic !and Ac#. >)#)re proper#&. Proper# )nder legal c)s#od and #'ose o4ned * m)nicipal corpora#ions necessar /or governmen#al p)rposes




3$

C'ap#er G Classi?ca#ion o/ Credi#s

Ar#icles 31 G 3,I. Classi?ca#ion o/ Credi#s

A. "eneral Classi?ca#iona. Abs%+#&e+7 $!e8e!!ed G "overnmen# en8os a*sol)#e pre/erence over o#'er credi#orsb. )$ec'a+ P!e8e!!ed C!ed'&s #'ose lis#ed in Ar#s. 31 and 3 s'all *e considered as mor#gages and pledges o/ real or

personal proper# or liens 0Ar#. 3&2. Hence- #'e are no# incl)ded in #'e insolven# de*#orFs asse#s.c. O!d'na!7 P!e8e!!ed C!ed'&s #'ose lis#ed in Ar#. 33 as amended * Ar#. 11$ o/ #'e !a*or Code.d. C%((%n C!ed'&s G #'ose lis#ed )nder Ar#. 3,- 4'ic' s'all *e paid pro ra#a regardless o/ da#es.Ordinar Pre/erred and Common Credi#s cover onl /ree proper# o/ #'e de*#or- or #'ose no# s)*8ec#ed #o Special Pre/erred Credi#.

B. As #o speci?c mova*le proper#a. D#&'es* &aes and 8ees d#e &e!e%n &% &e )&a&e %! an7 s#bd'v's'%n &e!e%8

Wi#' re/erence #o speci?c mova*le and immova*le proper# o/ #'e de*#or- #'e #a:es d)e #'e S#a#e s'all ?rs# *e sa#is?ed.b. C+a'(s a!'s'n" 8!%( ('sa$$!%$!'a&'%n* b!eac %8 &!#s&* %! (a+8easance b7 $#b+'c %:c'a+s c%(('&&ed 'n &e

$e!8%!(ance %8 &e'! d#&'es* %n &e (%vab+es* (%ne7 %! sec#!'&'es %b&a'ned b7 &e(c. C+a'(s 8%! &e #n$a'd $!'ce %8 (%vab+es s%+d* %n sa'd (%vab+es* s% +%n" as &e7 a!e 'n &e $%ssess'%n %8 &e

deb&%!* #$ &% &e va+#e %8 &e sa(e; and '8 &e (%vab+e as been !es%+d b7 &e deb&%! and &e $!'ce 's s&'++#n$a'd* &e +'en (a7 be en8%!ced %n &e $!'ce; &'s !'"& 's n%& +%s& b7 &e '((%b'+'<a&'%n %8 &e &'n" b7des&'na&'%n* $!%v'ded '& as n%& +%s& '&s 8%!(* s#bs&ance and 'den&'&7; ne'&e! 's &e !'"& +%s& b7 &e sa+e %8 &e

&'n" &%"e&e! ='& %&e! $!%$e!&7 8%! a +#($ s#(* =en &e $!'ce &e!e%8 can be de&e!('ned $!%$%!&'%na++7d. C!ed'&s "#a!an&eed ='& a $+ed"e s% +%n" as &e &'n"s $+ed"ed a!e 'n &e ands %8 &e c!ed'&%!* %! &%se"#a!an&eed b7 a ca&&e+ (%!&"a"e* #$%n &e &'n"s $+ed"ed %! (%!&"a"ed* #$ &% &e va+#e &e!e%8

e. Re>ec&'%na!7 C!ed'&sInde*#edness inc)rred in #'e repair or recons#r)c#ion o/ some#'ing previo)sl made- s)c' repair or recons#r)c#ion *eing madenecessar * #'e de#eriora#ion or des#r)c#ion o/ #'e #'ing as i# /ormerl e:is#ed.

8. C+a'(s 8%! +ab%!e!s? =a"es* %n &e "%%ds (an#8ac&#!ed %! &e =%! d%neWORYER PRE>ERENCE IN CASE O> BANYR<PTC. T'e la4 pro#ec#s 4or5ers in case o/ *an5r)p#c or insolvenc o/ #'e emploer.

T'is pro#ec#ion is es#a*lis'ed in Ar#. 11$ o/ #'e !a*or Code crea#ing a 4or5er pre/erence in s)c' an )nlimi#ed period- aidcovers no# merel )npaid 4ages- *)# o#'er mone#ar claims as 4ell.

". O#'er claims and Credi#s F%! e$enses %8 sa+va"e* #$%n &e "%%ds sa+va"ed; C!ed'&s be&=een &e +and+%!d and &e &enan&* a!'s'n" 8!%( &e c%n&!ac& %8 &enanc7 %n sa!es* %n &e sa!e %8

eac 'n &e 8!#'&s %! a!ves&; C!ed'&s 8%! &!ans$%!&a&'%n* #$%n &e "%%ds ca!!'ed* 8%! &e $!'ce %8 &e c%n&!ac& and 'nc'den&a+ e$enses* #n&'+

&e'! de+'ve!7 and 8%! &'!&7 da7s &e!ea8&e!; C!ed'&s 8%! +%d"'n" and s#$$+'es #s#a++7 8#!n'sed &% &!ave++e!s b7 %&e+ ee$e!s* %n &e (%vab+es be+%n"'n"

&% &e "#es& as +%n" as s#c (%vab+es a!e 'n &e %&e+* b#& n%& 8%! (%ne7 +%aned &% &e "#es&s; C!ed'&s 8%! seeds and e$enses 8%! c#+&'va&'%n and a!ves& advanced &% &e deb&%!* #$%n &e 8!#'&s a!ves&ed; C!ed'&s 8%! !en& 8%! %ne 7ea!* #$%n &e $e!s%na+ $!%$e!&7 %8 &e +essee e's&'n" %n &e '((%vab+e +eased and

%n &e 8!#'&s %8 &e sa(e* b#& n%& %n (%ne7 %! 'ns&!#(en&s %8 c!ed'&; C+a'(s 'n 8av%! %8 &e de$%s'&%! '8 &e de$%s'&a!7 as =!%n"8#++7 s%+d &e &'n" de$%s'&ed* #$%n &e $!'ce %8

&e sa+e.

C. R)les as #o pre/erred credi#s on speci?c mova*les In #'e /oregoing cases 0a*ove2- i/ #'e mova*les #o 4'ic' #'e lien or pre/erence a##ac'es 'ave *een 4rong/)ll #a5en- #'e credi#or

ma demand #'em /rom an possessor- 4i#'in #'ir# das /rom #'e )nla4/)l sei;)re. T'e claims or credi#s en)mera#ed in #'e ar#icles 31 and 31 s'all *e considered as mor#gages or pledges o/ real or personal

proper#- or liens 4i#'in #'e p)rvie4 o/ legal provisions governing insolvenc. Ta:es men#ioned in No. 1- Ar#icle 31- and No. 1-Ar#icle 3- s'all ?rs# *e sa#is?ed.

D. As &% s$ec'-c '((%vab+e $!%$e!&7 @A!& 2242 T'e /ollo4ing claims- mor#gages and liens s'all *e pre/erred- and s'all cons#i#)#e an enc)m*rance on #'e immova*le or real rig'#012 Ta:es d)e )pon #'e land or *)ilding902 >or #'e )npaid price o/ real proper# sold- )pon #'e immova*le sold9

0&2 Claims o/ la*orers- masons- mec'anics and o#'er 4or5men- as 4ell as o/ arc'i#ec#s- engineers and con#rac#ors- engaged in #'econs#r)c#ion- recons#r)c#ion or repair o/ *)ildings- canals or o#'er 4or5s- )pon said *)ildings- canals or o#'er 4or5s9032 Claims o/ /)rnis'ers o/ ma#erials )sed in #'e cons#r)c#ion- recons#r)c#ion- or repair o/ *)ildings- canals or o#'er 4or5s- )pon said*)ildings- canals or o#'er 4or5s90,2 @or#gage credi#s recorded in #'e Regis#r o/ Proper#- )pon #'e real es#a#e mor#gaged902 E:penses /or #'e preserva#ion or improvemen# o/ real proper# 4'en #'e la4 a)#'ori;es reim*)rsemen#- )pon #'e immova*lepreserved or improved9072 Credi#s anno#a#ed in #'e Regis#r o/ Proper#- in vir#)e o/ a 8)dicial order- * a##ac'men#s or e:ec)#ions- )pon #'e proper#a6ec#ed- and onl as #o la#er credi#s90+2 Claims o/ co'eirs /or 4arran# in #'e par#i#ion o/ an immova*le among #'em- )pon #'e real proper# #')s divided90%2 Claims o/ donors or real proper# /or pec)niar c'arges or o#'er condi#ions imposed )pon #'e donee- )pon #'e immova*ledona#ed901$2 Credi#s o/ ins)rers- )pon #'e proper# ins)red- /or #'e ins)rance premi)m /or #4o ears.

E. O!d'na!7 $!e8e!!ed c!ed'&s @A!& 2244Wi#' re/erence #o o#'er proper#- real and personal- o/ #'e de*#or- #'e /ollo4ing claims or credi#s s'all *e pre/erred in #'e ordernamed012 Proper /)neral e:penses /or #'e de*#or- or c'ildren )nder 'is or 'er paren#al a)#'ori# 4'o 'ave no proper# o/ #'eir o4n- 4'enapproved * #'e co)r#902 Credi#s /or services rendered #'e insolven# * emploees- la*orers- or 'o)se'old 'elpers /or one ear preceding #'ecommencemen# o/ #'e proceedings in insolvenc90&2 E:penses d)ring #'e las# illness o/ #'e de*#or or o/ 'is or 'er spo)se and c'ildren )nder 'is or 'er paren#al a)#'ori#- i/ #'e 'aveno proper# o/ #'eir o4n9032 Compensa#ion d)e #'e la*orers or #'eir dependen#s )nder la4s providing /or indemni# /or damages in cases o/ la*or acciden#- orillness res)l#ing /rom #'e na#)re o/ #'e emplomen#90,2 Credi#s and advancemen#s made #o #'e de*#or /or s)ppor# o/ 'imsel/ or 'ersel/- and /amil- d)ring #'e las# ear preceding #'einsolvenc902 S)ppor# d)ring #'e insolvenc proceedings- and /or #'ree mon#'s #'erea/#er9072 >ines and civil indemni?ca#ion arising /rom a criminal o6ense90+2 !egal e:penses- and e:penses inc)rred in #'e adminis#ra#ion o/ #'e insolven#Fs es#a#e /or #'e common in#eres# o/ #'e credi#ors-4'en properl a)#'ori;ed and approved * #'e co)r#90%2 Ta:es and assessmen#s d)e #'e na#ional governmen#- o#'er #'an #'ose men#ioned in Ar#icles 31- No. 1- and 3- No. 1901$2 Ta:es and assessmen#s d)e an province- o#'er #'an #'ose re/erred #o in Ar#icles 31- No. 1- and 3- No. 19




31

0112 Ta:es and assessmen#s d)e an ci# or m)nicipali#- o#'er #'an #'ose indica#ed in Ar#icles 31- No. 1- and 3- No. 19012 Damages /or dea#' or personal in8)ries ca)sed * a ()asidelic#901&2 "i/#s d)e #o p)*lic and priva#e ins#i#)#ions o/ c'ari# or *ene?cence90132 Credi#s 4'ic'- 4i#'o)# special privilege- appear in 0a2 a p)*lic ins#r)men#9 or 0*2 in a ?nal 8)dgmen#- i/ #'e 'ave *een #'es)*8ec# o/ li#iga#ion. T'ese credi#s s'all 'ave pre/erence among #'emselves in #'e order o/ priori# o/ #'e da#es o/ #'e ins#r)men#sand o/ #'e 8)dgmen#s- respec#ivel.

C'ap#er & G Order o/ Pre/erence o/ Credi#s

Ar#icles 3 G ,1I. Order o/ pamen#

A. Res)mea. A*sol)#el pre/erred credi#s

Ar#s. 31 and 3- 8oin#l 4i#' Ar#s. 3 and 3% es#a*lis' a twoBtier or-er o/ re/erene1. >irs# #ier G incl)des #a:es- d)#ies and /ees d)e #'e S#a#e or an s)*division #'ereo/- on speci?c mova*le or immova*le

proper# 0A*sol)#el pre/erred29. Second #ier G all o#'er special pre/erred 0non#a:2 credi#s s'all *e sa#is?ed prora#a- o)# o/ an resid)al val)e o/ #'e speci?c

proper# #o 4'ic' s)c' credi#s rela#e.

*. Speciall pre/erred credi#s1. As #o speci?c c'a##els. As #o speci?c immova*les

T'e prora#a r)le does no# appl #o credi#s anno#a#ed in #'e Regis#r o/ Proper# * vir#)e o/ a 8)dicial order- * a##ac'men#s ande:ec)#ions- 4'ic' are pre/erred as #o la#er credi#s.

c. Ordinar pre/erred credi#sAr#. ,$. T'e e:cess- i/ an- a/#er #'e pamen# o/ #'e credi#s 4'ic' en8o pre/erence 4i#' respec# #o speci?c proper#- real or

personal- s'all *e added #o #'e /ree proper# 4'ic' #'e de*#or ma 'ave- /or #'e pamen# o/ #'e o#'er credi#s 0Ordinar

pre/erred credi#s2.

d. Nonpre/erred credi#sAr#. ,1. T'ose credi#s 4'ic' do no# en8o an pre/erence 4i#' respec# #o speci?c proper#- and #'ose 4'ic' en8o pre/erence-as #o #'e amo)n# no# paid- s'all *e sa#is?ed according #o #'e /ollo4ing r)les

012 In #'e order es#a*lis'ed in Ar#icle 339

02 Common credi#s re/erred #o in Ar#icle 3, s'all *e paid pro ra#a regardless o/ da#es.

Credi#s 4'ic' do no# en8o an pre/erence 4i#' respec# #o speci?c proper# *eca)se #'e are no# among #'ose men#ioned inAr#s. 31 and 3 and #'ose 4'ile incl)ded in said ar#icles are )npaid *eca)se #'e val)e o/ #'e proper# #o 4'ic' #'epre/erence re/ers is less #'an #'e pre/erred credi# or credi#s- s'all *e sa#is?ed in #'e order es#a*lis'ed in Ar#. 33 4i#' re/erence#o o#'er real andUor personal proper#.

Common credi#s or #'ose 4'ic' do no# /all )nder Ar#s. 31- 3- and 33 do no# en8o an pre/erence and s'all *e paid prora#a regardless o/ da#es.

"ood !)c5 _2ooOoo

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