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VII. GUARANTY AND SURETYSHIP

A. General Provisions

Title Year

Doctrine

Ong v. PCIBIFC v. ITME.Zobel v. CARCBC v. CerroDino v. CAWillex v. CA

B. Effects

Title Year

Doctrine

Luzon v. SiaCochingyan v. R&B SuretyPeoples Bank v. TambuntingPNB v. Manila SuretyToh v. Solid BankAutocorp v. Intra Strata

VIII. PLEDGE, MORTGAGE and ANTICHRESIS

A. Common Provisions

Title Year

Doctrine

Manila Banking v. TeodoroDuran v. IACBank v. CAOlea v. CADayrit v.

CALopez v. CAYuliongsui v. PNB

B. Pledge

Title Year

Doctrine

DBP v. CAYuliongsui v. PNBManila Surety v. VelayoCaltex v. CAOng v. Roban Lending

C. Mortgage

1. Real Estate Mortgage

TitleYea

rDoctrine

Medida v. CA

1992

What is divested from the OR is only his full right as owner thereof to dispose and sell the lands.

OR remains as absolute owner of the property during redemption period and has the free disposal of his property (ie can mortgage the property again to another person)

It is only upon the expiration of the redemption period, when OR did not make use of his right, that the ownership of the land sole becomes consolidated with the purchaser.

What is actually effected where the redemption is seasonably exercised by the OR is not the recovery of ownership but the elimination from his title the lien.

Isaguirre v. De lara

2000

Mortgage, even if not recorded, in nonetheless binding between the parties.

As a GR, a MOR retains possession of the mortgage property since a mortgage is merely a lien and title to property does not pass to the MEE

A simple mortgage does not give possession of the property unless the mortgage should

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contain special provisions to that effect.

A possessor in BF is only entitled to necessary expenses and not for useful expenses.

Canlas v. CA

2000

A mortgage must be constituted only by the absolute owner of the property mortgaged.

A mortgage constituted by an impostor is void.

Suico v. PNB

2007

Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objectives are attained, immaterial errors and mistakes will not affect the sufficiency of the notice. But if such deter or mislead the buyers or depreciate the value of the property, or prevent it from bringing a fair price, such mistakes will be fatal.

Disposition of the proceeds:1. Pay the costs2. Pay off the mortgaged

debt3. Pay junior encumbrances4. Give balance to MOR

2. Chattel Mortgage

Title Year

Doctrine

Acme Shoe Rubber v. CA

1996

While pledge, REM or antichresis exceptionally after-incurred obligations so long as they are accurately described. CM, however, can only cover obligations existing at the time the mortgage is constituted.

Tumalad v. Vicencio

1971

By ceding, selling or transferring house by way of CM, house is treated as chattel.

Makati Leasing v. Wearever

1983

Where CM is constituted on machinery permanently attached to the ground, the machinery is considered as personal property and the CM is valid regardless of who owns the land.

Dy v. CA

1991

MOR retains ownership over the property given as security and has the right to sell it with the obligation to secure written consent of the MEE. Validity of the sale is not affected if no consent was obtained by MEE.

Pameca v. CA

1999

Whereas in pledge, the sale of the thing pledged extinguishes the entire principal obligation, CML expressly entitles the MOR to the balance of the proceeds upon satisfaction of the principal obligation and costs.

3. Antichresis

IX. CONCURRENCE AND PREFERRENCE OF CREDIT CIVIL CODE

A. Common Provisions

Concurrence of credit – implies the possession by 2 or more creditors of equal rights or privileges over the same property or all of the property of debtor

Preference of credit – right held by a creditor to be preferred in the payment of his claim above others

Nature and effect:1. Strictly construed2. An exception to the general rule3. Not an interest but only a preferential right4. Not take/sell the property, only right to the

proceeds5. Must be asserted and maintained, otherwise

it is lost

When applicable:1. 2 or more creditors2. Separate and distinct claims3. Same debtor4. Debtor has insufficient property5. Credits are due

2236 General Rule: all properties of debtor are liable for the fulfillment of the obligation

Exceptions:1. As to present property:

Family home Sec. 13, Rule 39 ROC

2. A s to future property Debtor who has obtained a

discharge on account of his insolvency

See insolvency law3. Under legal custody4. Public dominion

2237 Civil Code prevails in case of conflict with the special law unless otherwise provided in the latter.Aim of insolvency proceedings – conserve all the remaining assets of the insolvent or liquidated person/corp for distribution to the creditors, after payment of taxes

2238 General Rule: assets of CP do not pass to the assignee in insolvency as they do not belong to the individual spouses

When applicable:1. Partnership/Community subsists2. Obligation have not redounded to

the benefit of the family2239 1. Co-ownership

2. Debtor is one of the co-owners> undivided share or interest shall be

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possessed by the assignee> share of the other co-owners won’t be

taken2240 Property held in trust not included.

Trustee is not the owner of the property.

B. Classification

General Categories1. Special preferred credits (Art. 2241 and 2242)2. Ordinary preferred credits (Art. 2243)3. Common credits (Art. 2245)

Note:1. 2241 and 2242 do not give the order of

preference but just enumerates the credits which enjoy preference with respect to specific property

2. Credit of a mortgagee of motor vehicle cannot be considered preferred until it has been recorded in the LTO

2241 Last paragraph applies only when the right to ownership continues in the debtor and not applicable when debtor has already parted with the ownership.

2242 Recorded mortgages credits Directly and immediately subjects

the property upon which it is imposed to the fulfillment of the obligation

Creates a real right which is enforceable against the whole world

Refectionary credit – an indebtedness incurred in the repair or reconstruction of something previously made (ie for deterioration or destruction)

2243 Provisions on pledge and mortgage are also applicable. In case of insolvency, such claims or credits shall be considered as liens within the purview of insolvency law. They are not included in the insolvent debtor’s asset.

2244 Preference of credits evidenced by public instruments or final judgments are placed in the same order of preference. Preference among themselves = PRIORITY IN TIME.

Not applicable to the State2245 Other credits (not included in the

preceding articles) enjoy no preference.

Cases:

Title Year DoctrineDBPv.

NLRC

1989 The preference given to workers by Art. 110 LC when not falling within Art. 2241(6) and Art. 2241(3) and not attached to any

specific property, is an ORDINARY PREFERRED CREDIT although the impact is to move it from 2nd to 1st priority (Art. 2244).

EEs should file their claims in proceeding in bankruptcy on their ER.

RA 6715 expanded “worker preference” to cover money claims of laborers to which claims of Government must be deemed subordinate. It has prospective application.

Barettov.

Villanueva1961

Mortgage credits over real property, in order to be given preference, must be recorded in the ROP. But a recorded mortgage credit is superior to an unrecorded unpaid vendor’s lien.

In the absence of insolvency proceeding, the conflict must be decided pursuant to the well-established principle re registered lands (purchaser in good faith)

There being no insolvency proceeding, the claim on an unpaid vendor did not require character and a rank of a recorded mortgage and must remain subordinate to the latter.

Atlanticv.

Herbal Cove

2003

Annotation also applies to suits seeking to establish a right to or an equitable estate or interest in an SRP, to enforce a lien, charge or an encumbrance.

A complaint for collection and damages is not the proper mode for the enforcement of contractor’s lien.

Annotation of a notice of LP on titles to properties is not proper in cases where in the proceedings are actions in personam.

Art. 2242 does not apply because the case is not an insolvency proceeding or an action in which the adjudication of claims of preferred creditors could be ascertained.

Consuelo Metal

v.Planters

Bank

2008 While SEC has jurisdiction to order the dissolution of a juridical entity, jurisdiction over the liquidation now pertains to RTCs.

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If rehabilitation is no longer feasible and the assets of the corporation are finally liquidated, secured creditors shall enjoy preference over unsecured creditors, subject only to the provisions of CC on concurrence and preference of credits.

Creditor-mortgagee has right to foreclose the mortgage over a SRP whether the debtor-OR is under insolvency or liquidation proceeding or not.

DBPv.CA

2001

In the absence of liquidation proceedings, the vendor’s lien on the unpaid purchases cannot be enforced against the transferee of such purchases.

Ruling Barretto v. Villanueva also applies to SMPs.

Gateway electronic

s v. Asianbank

2008

The issuance of an order declaring the petitioner insolvent after the insolvency court finds the corresponding petition for insolvency to be meritorious shall stay all pending civil actions against the property.

Once an order of insolvency was issued, all civil proceedings against the property are automatically stayed.

C. Order of Preference

2246 Those that enjoy preference over specific movable, exclude all others

2247 2 or more credits wrt same SMP, satisfied PRO RATA (after payment of duties and taxes)

2248 Those that enjoy preference over specific real, exclude all others

2249 2 or more credits wrt same SRP, satisfied PRO RATA (after payment of duties and taxes)

2250 Excess → free property for payment of other credits

2251 Other credits:1. In order established in Art. 22442. Common credits – pro rata –

regardless of date

2 tier order of preference1. 1st tier – taxes, duties, and fees due on

SMP/SRP

2. 2nd tier – special preferred non-tax credits (pari passu or pro rata)

Note: Pro rata rule does not apply to credits

annotated in the ROP in virtue of judicial order, attachment or execution which are preferred to as “later credits” – rule is still priority in ORDER OF TIME

Proceeding required for adjudication of claims of preferred creditors (Insolvency or similar proceeding)