credit transactions 2003

CIVIL LAW REVIEWER

PAGE 15( CIVIL LAW REVIEWER ( SAINT LOUIS UNIVERSITY BAR OPERATIONS

LOAN

Art. 1933

2 Kinds of Loan:

1. Commodatum where the bailor delivers to the bailed or non-consumable thing so that the latter may use it for a certain time and return the identical thing.

2 Kinds of Commodatum:

1. Ordinary Commodatum (Art.1933); and

2. Precarium one where the bailor may demand the thing at will.

2. Simple loan or mutuum where the sender delivers to the borrower money or other consumable thing upon the condition that the latter shall pay the same amount of the same kind and quality.

Commodatum and Mutuum distinguished:

1. Commodatum ordinarily involves something not consumable (Art.1936), while in mutuum, the subject matter is money or other consumable thing.2. In commodatum, ownership of the thing loaned is retained by the lender (Art. 1933), while in mutuum, the ownership is transferred to pay interest.

3. Commodatum is essentially gratuitous (Art.1933), while mutuum may be gratuitous or it may be onerous, that is, with stipulation to pay interest.

4. In commodatum, the borrower must return the some thing loaned (Art.1933), while in mutuum the borrower much only pay the same amount of the same kind and quality.

5. Commodatum may involve real or personal property (Art. 1935), while mutuum refers only to personal property.

6. Commodatum is a loan for else or temporary possession (Art. 1935), while mutuum is for loan for consumption.

7. In commodatum, the bailor may demand the return of the thing loaned before the expiration of the term in case of urgent need (Art.1946), while in mutuum, the lender may not demand its return before the lapse of the term agreed upon, and

8. In commodatum, the lose of the subject matter is suffered by the bailor since he is the owner (Art. 1942; Art.1147), while in mutuum, the borrower suffers the loss ever if caused exclusively by fortuitous event and he is not, therefore, discharged from his duty to pay.

Art.1934 An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract.

Commodatum

Art. 1935 The bailees in commodatum acquires the eye of the thing loaned but not is fruits, unless there is stipulation that the bailed may make use of the fruits of the things loaned (Art. 1940); if any compensation is to be paid by him who acquires t he use, the contract ceases to be a commodatum.Art. 1936

Art. 1937

Subject matter of the contract:

In commodatum, the subject matter is generally non- consumable things, whether real or personal. However, if he purpose of the contract is not the consumption of the object as when it is merely for exhibition, consumable foods may be the subject of commodatum.

Art.1938

Bailor need not be owner:

The bailor need not be the owner of the thing loaned since by the loan, ownership does not pass to the borrower. Hence, a mere lessee of the thing, or the usufractuary may lend but the borrower or bailed himself may not lend nor lease the thing loaned to him to a third person.

Art. 1939 See Article (An exception to the general rule that all rights acquired in virtue of an obligation are transmissible Art.1178)

Art. 1939 Exception to Art. 1935

Obligation of the BaileeArt. 1943 The bailed does not answer for the deterioration of the thing loaned due only to the use thereof and without his fault. But the bailee is liable if he is guilty of fault or negligence (Art. 1170) or if he devotes the thing to any purpose different from that for which it has been loaned.

Art.1944. See Article

Art. 1945. See ArticleArt. 1945 is an exception to the general rule that the concerned of two or more parties in the same obligation gives rise only to a joint obligation (Arts. 1207,1208).

Obligations of the Bailor

Articles 1946 1952. See Articles

Art. 1946. See Articles

*The bailor cannot demand the return of the thing loaned till after the expiration of the period stipulation, or after the accomplishment of the use for which the commodatum has been constituted, Except:

1. If he should have an urgent need of the thing, or

2. If the borrower commits an act of ingratitude (Art.1943) (Sec. Art.765)

Art. 1947. See Article

*Precarium is a kind of commodatum where the bailor may demand the thing at will.

Art. 1948. Exception to Art. 1946


1. Extraordinary expenses for the preservation of the thing loaned.

Such expenses shall be borne by the bailor (e.g., expenses for repairing borrowed house damaged by a typhoon).

2. Extraordinary expenses arising from actual use of the thing loaned.

Such expenses shall be borne by the bailor and bailee alike on a 50-50 basis (e.g., expenses for repairing a borrowed jeep damaged in a collision.)


Art. 1951. See Article. On exception to Art. 1944

* The following are the requisites which must concern for the application of the above article.

1. There is flaw or defect in the thing loaned.

2. The flaw or defect is hidden.

3. The bailor is aware thereof.

4. He does not advise the bailee of the same.

5. The bailee suffers damages by reason of said flaw or defect.Art. 1952.See Article

Simple Loan or Mutuum


* Simple loan, or mutuum is a contract whereby one of the parties delivers to another many or other consumable thing with the understanding that the same amount of the same kind and quality shall be said.

* Tangible things are those which are usually dealt with by number, weight or measure such as rise, oil, sugar etc. so that any given unit or portion is treated as the equivalent of any other unit or portion.

Art. 1954

*Barter or Exchange one of the parties finds himself to give one thing in consideration of the others promise to give another thing.Art. 1955

* Form of Payment

1. Loan of Money

If the thing loaned is money, payment must be made in the currency stipulated, if it is possible to deliver such currency; otherwise, it is payable in the currency which is legal tender in the Philippines (Art. 1249) and in case of extraordinary inflation or deflation, the basis of payment shall be the value of the currency at the time of the creation of the obligation (Art.1250).Loan of Tangible Thing

If what was loaned is a fungible thing other than money, the borrower is under obligation to pay the lender another thing of the same kind, quality, and quantity. It case it is impossible to do so, the borrower shall pay its value at the time of the perfection of the loan.

Art. 1955

* Requisites for recovery of interest:

1. The payment of interest must be expressly stipulated.

2. The agreement must be in writing

3. The interest must be lawful

* Liability for interest even in the absence of stipulation:

1. Indemnity for damages

The debtor in delay is liable to pay legal interest (6%/12%) as an indemnity for damages even in the absence of stipulation for the payment of interest.

2. Interest Accruing from unpaid interest

Interest due shall earn interest from the time it is judicially demanded although the obligation may be silent upon this point.



Art. 1959

* When unpaid interest earns interest.

As a general rule, accrued interest shall not earn interest except in two instances.

1. When judicially demanded as provided for in Art. 2212, and

2. When there is an express stipulation made by the parties to witness that the interest due and unpaid shall be added to the principal obligation and the resulting total amount shall earn interest.

Art. 1960. See Article in relation to Art. 2154 and Art. 1423.


xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxDEPOSIT(Arts. 1962 - 2009)Deposit in General and is Different Kinds:

Art. 1962.

* Definition of deposit first sentence

* When there is no deposit second sentence


Art. 1964.

* Kinds of Deposit

Deposit is either:

1. Judicial or one which takes place when an attachment or seizure of property in litigation is ordered. (Arts. 2005 - 2008)

2. Extrajudicial (Art.1967) which maybe;

a. Voluntary or one wherein the delivery is made by the will of the depositor or by two or more persons each of whom believes himself entitled to the thing deposited (Arts. 1968 - 1995); or

b. Necessary or one made in compliance with a legal obligation, or on the occasion of any calamity, or by travelers in hotels and inns (Arts.1996 - 2004) or by travelers with common carriers. ( Arts. 1734 - 1735)

Art. 1965.

* A contract of deposit is generally gratuitous;

except: 1. When there is an agreement to the contrary

2. When the depository is engaged in the business of storing goods.

Art. 196. -

* Subject Matter of Deposit:

Only movable or personal property maybe the object of extrajudicial deposit, whether voluntary (Art. 1968) or necessary (Art. 1995). Judicial deposits (Art. 2005 - 2006), however, may cover movable as well as immovable property its purpose being to protect the rights of parties to a suit.

Art. 1967. Discussed above

Voluntary Deposit

Sec. 1. General Provisions

Art. 1968.

* Voluntary deposit is one wherein the delivery is made by the will of the depositor.

Art. 1969.

* Form of Contract of Deposit:

The above article follows the general rule that contracts shall be obligatory in whatever from they may have been entered into provided all the essential requisites for their validity are present, (Art. 1356). Thus, except for the delivery of the thing, there are no formalities required for the existence of the contract.

Art. 1970.

* Where depositary capacitated and depositor incapacitated.

If the depository is capacitated, he is subject to all the obligations of a depository whether or not the depositor is capacitated. In the latter case, the depository must return the property to the legal representative of the incapacitated or to the depositor himself if he should acquire capacity (Art. 1986).

Art. 1971.

* Where depository incapacitates and depositor capacitated.

The incapacitated depository does not incur the obligation of a depository. However, he is liable;

1. To return the thing deposited while still in his possession, and

2. To pay the depositor the amount by which he may have benefited himself with the thing or its price subject to the right of any third person who acquired the thing in good faith.

Sec. 2.- Obligations of the Depositary

* Obligations of the depositary:

1. To keep the thing safely and return it (Art. 1972).

2. Obligation not to transfer deposit (Art.1973).

3. Obligation not to change way of deposit (Art. 1974)

4. Obligations to collect interest as it becomes due and to take such steps as maybe necessary to pressure its value and the rights corresponding to it. (Art. 1975).

5. Obligation not to commingle things deposited is so stipulated.

6. Obligation not to make use of thing deposited unless authorized.

7. Obligation to return products, accessories, and accessories (Art.1983).

* Rules applicable care and delivery of the thing:

a. He is liable if the loss occurs through his fault or negligence (Art. 1170), even if the thing was insured (Art. 2207).

b. The loss of the thing while in his possession raises a presumption of fault on his part (Art. 1265).

c. The required degree of care is greater if the deposit is for compensation than when it is gratuitous. Similar to agency (Art. 1909) and common carriers (Art. 1733).

Art. 1973.

* The depositor is liable for the loss of the thing deposited if;

a. He transfers the deposit with a third person without authority although there is no negligence on his part and the third person.

b. He deposits the thing with a third person who is manifestly careless or unfit although authorized, even in the absence of negligence.

c. The thing is lost through the negligence of his employers whether the latter are manifestly careless or unfit.

Art. 1974.

* When may the depositary change the way of the deposit?

If under the circumstances he may reasonably presume that the depositor would consent to the change if he knew of the facts of the situation.

Art. 1978.

* What are the obligations of the depository if the thing deposited should earn interest?

1. To collect not only the interest, but also the capital itself when due.

2. To take such steps as may be necessary to preserve its value and the right corresponding to it.


Art. 1977. See Article in relation to Art. 1978

Art. 1979.

* Generally, the depository is not liable for the loss through a fortuitous event without his fault (Art. 1174). However, the depository is liable for the loss of the thing through a fortuitous event;

a. If it is so stipulated

b. If he uses the thing without the depositors permission.

c. If he delays its return.

d. If he allows others to use it, even though he himself may have been authorized to use the same.


Art. 1981.

* What are the obligations of the depository where thing deposited delivered closed and sealed?

a. To return the thing deposited when delivered closed and sealed, in the same condition.

b. To pay for damages should the seal or lock be broken through his fault, which is presumed unless proved otherwise.

c. To keep the secret of the deposit when the seal or lock is broken, with or without his fault.

Art. 1982.

* When depository justified to open the thing deposited which is closed and sealed?

a. When there is presumed authority, or

b. When necessary


Art. 1984

* What is the obligation of the depository where third person appears to be owner and how be may be relieved from responsibility?

See paragraph 2, 3, 4 of the above article.

Art. 1985.

* Right of two or more depositors:

1. Thing deposited divisible and depositors not solidary.

Each one can demand only his share proportionate thereto.

2. Obligation solidary or thing deposited not divisible.

Each one of the solidary depositors may do whatever may be useful to the others but not anything which may be prejudicial to the latter (Art 1212), and the depository may return the thing to any one of the solidary depositors unless a demand, judicial or extrajudicial, for its return has been made by one of them in which case delivery should be made to him.

3. Return to one of depositors stipulated

The depository is found to return it only to the person designated although he has not made any demand for its return.

Art. 1986 See Article in relation to Article 1970

Art. 1987

Where must the depository return the thing deposited?

- The thing must be returned;

1. At the place agreed upon by the parties, and

2. In the absence of stipulation, at the place where the thing deposited might be even if it should not be the same place where the original deposit was made provided the transfer was accomplished without malice on the part of the depository.

Art. 1988

When must the depository return the thing deposited?

- The thing deposited must be returned to the depositor upon demand, even though a specified period or time for such return may have been fixed, except when the thing is judicially attached, or should he have been notified of the opposition of a third person to the return or the removal of the thing deposited. In these cases, the depository must immediately inform the depositor of the attachment or opposition.

Art. 1989 See Article in relation to Art. 1258 par. 1

Art. 1991

Obligation of an heir in good faith who sold the thing deposited.

- The depository shall only be found to return the price he may received or to assign his right of action against the buyer in case the price has not been paid him.

If the heir acts in bad faith, he is liable for damages. The sale or appropriation of the thing deposited constitutes estafa. (Art. 315, par. 1[b], RPC).

Sec. 3 Obligation of the Depositor

Obligation of the Depositor:

1. The obligation to pay expenses of preservation if the deposit is gratuitous. (Art. 1992).

*If the deposit is for compensation, the expenses of preservation are borne by the depository because they are seemed included in the compensation.

2. The obligation to pay losses incurred due to character of thing deposited, unless at the time of the constitution of the deposit;

a. the depositor was not aware of or

b. the depositor was not expected to know the dangerous character of the thing, or

c. he notified the depository of the same, or

d. the depository was aware of it without advice from the depositor. (Art. 1993).



These causes of extinguishments of deposit are not exclusive (See Art. 1231).

NECESSARY DEPOSIT

When deposit necessary?

1. When it is made in compliance with a legal obligation, (Art. 1996)

2. When it takes place on the occasion of any calamity, (Art. 1996)

3. When it is made by travelers in hotels or inns, (art. 1998)

4. When it is made by passengers with common carriers, (Art.1754)



Art. 2000 Art. 2001 Art. 2002

When hotel keeper liable?

1. The loss or injury is caused by his servants or employees as well as by strangers (AR. 2000) provided that notice has been given and proper precautions taken (Art. 1998); and

2. the loss is cause by the act of a thief or robber done without the use of arms and irresistible force. (Art. 2001)

When hotel keeper not liable?

1. The loss or injury is caused by force majeure, unless he is guilty of fault or negligence in failing to provide against loss or injury from his cause. (Art 1170, 1174).

2. The loss is due to the acts of the guests, his family servants, or visitors (Art. 2002), and

3. The loss arises from the character of the things brought into the hotel. (Ibid).


Art. 2004.See Article

SEQUESTRATION OF JUDICIAL DEPOSIT

When judicial deposit takes place

Judicial deposit or sequestration takes place when an attachment or seizure of property in litigation is ordered by a court. (Act. 2005).

Obligation of depository of sequestrated property.

The depository of sequestrated property is the person appointed by the court. (Art. 2007). He has the obligation to take care of the property with the diligence of a good father of a family (Art. 2008) and he may not be relieved of his responsibility until the litigation is ended or the court so orders (Art. 2007).

Guaranty and Suretyship

(Arts. 2047-2084)

Chapter I

Nature and Extent of Guaranty

Art. 2047

Guaranty is a contract whereby a person binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.

Classification of guaranty

1. As to its origin:

a. Conventional one constituted by agreement of the parties, (Art. 2051 par.1)

b. Legal one imposed by virtue of a provision of law. (Ibid)

c. Judicial one required by a court to guarantee the eventual right of one of the parties in a case. (Ibid)

2. As to Consideration:

a. Gratuitous one where the guarantor does not receive any price or remuneration for acting as such, (Art. 2048), or

b. Onerous one where the guarantor receives valuables consideration for his guaranty. (Ibid)

3. As to the person guaranteed:

a. Single one constituted solely to guarantee or secure performance by the debtor of the principal obligation (Art. 2051,par. 2)

b. Double or sub-guaranty one constituted to secure the fulfillment by the guarantor of a prior guaranty. (Ibid)

4. As to its scope and extent:

a. Definite one where the guaranty is limited to the principal obligation only, or to a specific portion thereof. (Art. 2055, par. 2)

b. Indefinite or Simple one where the guaranty includes not only the principal but also it accessories.

Suretyship defined

Is a relation which exists where one person (principal) has undertaken an obligation and another person (surety) is also under a direct and primary obligation or other duty to the oblique, who is entitled to out one performance, and as between the two who are found, the second rather than the first should perform.

Guaranty Distinguished from Suretyship:

1. A surety and a guarantor are alike in that each promises to answer for the debt, default or miscarriage of another.

2. a surety and a regular party to the undertaking, while the liability of the guarantor depends upon on independent agreement to say the obligation if the primary debtor fails to do so.

3. a surety is charged as an original promissor, while the engagement of the guarantor is a collateral undertaking.

4. the guarantor is secondarily liable, while al surety is primarily liable.


Art. 2049

Married woman as guarantor:

A married woman who acts as a guarantor ordinarily binds only her separate property (Art. 145, Family Code). However, she may also bind the community or conjugal partnership property with her husbands consent, and even without the consent of her husband, in cases provided by law, such as the guaranty has redounded to the benefit of the family. (see Arts. 70,7, 94(3),121(3),122,Fam.Code)


Art. 2051. Discussed Above

Art. 2002

A guaranty may secure the performance of;

a. Voidable contract inasmuch as such contract is binding, unless it is annulled by a proper action is court.

b. An unenforceable contract

c. A natural obligation

Art. 2003.See Article


Art. 2055. See Article, discussed above.

Art. 2056

Art. 2007

Qualification of guarantor:

1. He possesses integrity

2. He has capacity to bind himself

3. He has sufficient property to answer for the obligation which he guarantees

Effect of subsequent loss of required qualifications

The qualifications need only be present at the time of the perfection of the contract. So, the subsequent loss of integrity or property or supervening incapacity of the guarantor (Art. 2057) would not operate to exonerate the guarantor of the eventual liability he has contracted, and the contract of guaranty continues. However, the creditor may demand another guarantor with the proper qualifications. But he may waive it if he chooses to hold the guarantor to his bargain.

EFFECTS OF GUARANTY

Sec. 1 Effects of guaranty between the guarantor and the creditor

Art. 2058

Right of guarantor to benefit of excussion or exhaustion

See article

Art. 2059. See article is relation to Art. 2060 and Art. 2084. Exceptions to benefit of excussions

In the following cases the guarantor is not entitled to the benefit of excussion;

1. As provided in Article 2059

2. If he does not comply with Article 2060

3. If he is a judicial bondsman and subsurety (Art. 2084)

4. Where a pledge or mortgage has been given by him as a special security

5. If he fails to interpose it as a defense before judgment is rendered against him.

Art. 2060

Requirements before a guarantor may make sure of the benefit of excussion.

1. He must set it up against the creditor upon the latters demand for payment from him, and

2. point out to the creditor available property of the debtor within Philippine Territory, sufficient to cover the amount of the debt.

Art. 2061. See Article Art. 2062. See Article

Joinder of guarantor and principal as parties defendant

1. General Rule The guarantor, not being a joint contractor with his principal, cannot as a general rule, be sued with his principal

2. Exception Yet adherence to this rule is not required where it would serve merely to delay the ultimate accounting of the guarantor.

Art. 2063

Compromise defined

Is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. (Art. 2028)


Who may enjoy the benefit of excussion

1. The guarantor

2. the guarantor of a guarantor

Art. 2065

Extent of liability is only joint, that is, the obligation to answer for the debt is divided among all of them. Therefore, the guarantors are not liable to the creditor beyond the shares which they are respectively found to pay.

Exceptions:

The exception to this rule is when solidarity has been expressly stipulated. The benefit of division also ceases is any of the circumstances enumerated in Art. 2054 should take place, as would the benefit of exhaustion of the debtors property.

Sec. 2 Effects of guaranty between the debtor and the guarantor


Exceptions to right to indemnity or reimbursement. See

1. Art. 2068

2. Art. 2069

3. Art. 2070

4. Art. 2081

a. Where the guaranty is constituted without the knowledge or against the will of the principal debtor, the guarantor can recover only insofar as the payment had been beneficial to the debtor (Art. 2050)

b. Payment of a third person who does not intend to be reimbursed by the debtor is seemed to be a donation. (Art. 1238)

c. The right to demand reimbursement is subject to waiver

Art. 2067. Guarantors right to subrogation. See Article






The guarantor who guarantees the debt of an absentee at the request of another has a right to claim reimbursement, after satisfying the debt either from;

1. The person who requested him to be a guarantor

2. The debtor (see Art. 2050)

Sec. 3 Effects of Guaranty as between co-guarantors


Art. 2074. See Article Art. 2075. See Article

EXTINGUISHMENTS OF GUARANTY

Art. 2076

Causes of extinguishments of guaranty

1. Guaranty being accessory and subsidiary, it is also terminated when the principal obligation is extinguished.

2. Art. 1231

3. The guaranty itself may be directly extinguished although the principal obligation still remains such as in the case of the release of the guarantor made by the creditor. (see Art. 2078)

Guaranty is extinguished;

1. When the principal obligation has been extinguished (Art. 2076)

2. If the creditor voluntarily accepts immovable or other property in payment of the debt. (Art. 2077)

3. When the creditor granted an extension to the debtor without the consent of the guarantor. (Art. 2079)

4. If there can be no subrogation because of the fault of the creditor. (Art. 2080)


Art. 2081. In relation Art. 2066. an exception to the right to indemnity or reimbursement.

LEGAL AND JUDICIAL BONDS

Art. 2082

Meaning and form of bond

A bond, when required by law, is commonly understood to mean an undertaking that is sufficiently secured, and not cash or currency.

Qualifications of personal bonds man

A bondsman must have the qualifications required of a guarantor (Art. 2056) and in special laws like the Rules of Court (Sec. 12,13, Rule 114)


Art. 2084. In relation to Art. 2059. an exception to benefit of excussion.

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PLEDGE

Art. 2085

Essential requisites of pledge

1. That they be constituted to secure the fulfillment of a principal obligation

2. that the pledgor be the absolute owner of the thing pledged.

3. that the persons constituting the pledge have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

In addition, it is necessary that the thing pledged be placed in the possession of the creditor, or of a third person by agreement. (Art. 2093)

Pledge; defined

Is a contract by virtue of which the debtor delivery to the creditor or to a third person a movable (Art. 2094) on document evidencing incorporeal rights (Art. 2095) for the purpose of securing the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall be returned with all its fruits and accessions.



Kinds of Pledge

Pledge may be either;

1. Voluntary or conventional or one which is created by agreement of the parties.

2. Legal or one which is created by operation of law.

Art. 2088

Pactum Commissorium; defined

A stipulation whereby the thing pledged or mortgaged or under antichresis shall automatically become the property of the creditor in the event of non-payment of the debt within the term fixed. However, the pledge may appropriate the thing pledged if after the first and second auctions, the thing is not sold. (Art. 2112)

Art. 2089

Exceptions to Rule of Indivisibility

A pledge is indivisible (par. 1) except where there are several things given in pledge and each one of them guarantees only a determinate portion of the credit. (pars. 3 & 4)




Art. 2093. See Article in relation to Art. 2085 above

Art. 2094

Art. 2095

Subject Matter of Pledge:

1. All movable which are within commerce and susceptible of possession.

2. Incorporeal rights evidenced by documents whether negotiable or not.




Art. 2099

Obligation of the pledges to take due care of thing pledged.

Having possession of the property, he has the obligation to take care of the same with the diligence of a good father of the family(Art. 1163). He is, however, entitled to reimbursement of the expenses incurred for its preservation. (See Arts. 1170, 1174)

Art. 2100

Obligation of pledges not to deposit thing pledged with another.

While the pledges is entitled to retain the possession of the thing pledged until the debt is paid (Art. 2098), he is not authorized to transfer possession to a third person.

Art. 2101

Responsibility of pledge for flaws of thing pledged.

Please see Art. 1951

Art. 2102

The pledges has no right to use the thing pledged or to appropriate the fruits thereof without the authority of the owner (Art. 2104). But the pledges can apply the fruits, income, dividends, or interests earned or produced by the thing pledged to the payment of interest, if owing and thereafter to the principal of his credit.


Art. 2104

Right of pledger to ask that thing pledged be deposited

In the following cases, the owner may ask that the thing pledged be deposited judicially or extrajudicially;

1. If the creditor uses the thing without authority

2. If he misuses the thing in any other way

3. If the thing is in danger of being lost or impaired because of the negligence or willful act of the pledgee. (Art 2106)



Art. 2107

Right of pledgor to substitute thing pledged.

Requisites:

1. The pledgor has reasonable grounds to fear the destruction or impairment of the thing pledged.

2. There is no fault on the part of the pledges.

3. The pledgor is offering in place of the thing, another thing in pledge which is of the same kind and quality as the former.

4. The pledges does not choose to exercise his right to cause the thing pledged to be sold at public auction.

Art. 2108 See Article in Relation to Article 2112

Art. 2109

Two remedies available to the pledges in case he is deceived as to the substance or quality of the thing pledged.

1. To claim another thing in pledged.

2. To demand immediate payment of the principal obligation

The remedies are alternative, that is, he is privileged to choose only one and not both.

Art. 2110

Pledge may be extinguished by;

1. The return of the thing pledged by the pledges to the pledgor or owner (Art. 2110)

2. The payment of the debt. (Art. 2105)

3. The renunciation or abandonment of the pledged (Art. 2111)

4. The sale of the thing pledged at public auction (Art. 2115)

Presumption of extinguishments of pledged

The possession of the debtor or owner of the thing pledged subsequent to the perfection of the pledge gives rise to a prima facie presumption that the thing has been returned and, therefore, that the pledge has been extinguished. Art. 2111. See Article in relation to Article 2110 above on extinguishments of pledge.

Requisites:

1. The debt is due and unpaid (Art. 2112)

2. The sale must be at a public auction (Ibid)

3. There must be noticed to the pledgor and owner, stating the amount due. (Ibid)

4. The sale must be made with the intervention of a notary public. (Ibid)

5. There is danger of destruction, improvement, or diminution in value of the thing pledged without the fault of the pledge. (Art. 2108)

Art. 2113. See Article (Right of pledgor and pledgee to bid at public sale)

Art. 2114. See Article (Rid must be for cash)

Art. 2115.

Effect of sale of thing pledged

The sale of the thing pledged extinguishes the principal obligation whether the price of the sale is more or less than the amount.

1. If the price of the sale is more than the amount due the creditor, the debtor is not entitled to the excess unless the contrary is provided.

2. If the price of the sale is less, neither is the creditor entitled to recover the deficiency a contrary stipulation is void.


Art. 2117

Right of third person to satisfy obligation

As a general rule, the creditor is not found to accept payment or performance by a third person who has no interest in the fulfillment of the obligation (Art. 1236). Under this Article, a third person who has any right in or to the thing pledged may pay the debt as soon as it becomes due and demandable and the creditor cannot refuse to accept payment.

Art. 2118. See Article (Right of pledgee to collect and receive amount due on credit pledged)

Art. 2119. See Article (Right of pledgee to choose which of several things pledged shall be sold)




Art. 2123. See Articlexxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

REAL MORTGAGE Read also Arts. 2085 2092

Mortgage; defined

Is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to security immovable property or real rights over immovable property which obligation shall be satisfied with the proceeds of the sale of said property or rights in case the said obligation is not complied with at the time stipulated. Essential Requisites of Mortgage (Art. 2085)

1. That they be constituted to secure the fulfillment of a principal obligation.

2. That the mortgagor be the absolute owner of the thing mortgaged.

3. That the persons constituting the mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

In addition, the document in which it appears be recorded in the Registry of Property. If not recorded, the mortgage is nevertheless finding between the parties.

Art. 2124

Object of a contract of mortgage

1. Immovables (Art. 415)

2. Alienable real rights in accordance with the laws, imposed upon immovables.

Kinds of Mortgage

A mortgage may be;

1. Voluntary one which is agreed to between the parties or constituted by the will of the owner of the property on which it is created.

2. Legal one required by law to be executed in favor of certain persons.

3. Equitable one which, although it lacks the proper formalities of a mortgage, shows the intention of the parties to make the property as a security for a debt.

The provisions in the Civil code governing equitable mortgages are found in Arts. 1365, 1450, 1454, 1602, 1603, 1604, and 1607.


Effect of invalidity of mortgage on principal obligation

Where a mortgage is not valid, e.g., it is executed by one who is not the owner of the property (Art. 2085(2)), or the consideration of the contract is simulated (Arts. 1345, 1352), or false (Art. 1353), the principal obligation which it guarantees is not rendered rule and void.

What is lost is the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation.


Art. 2127

Extent of Mortgage

A real estate mortgage constituted on immovable property is not limited to the property itself but also extends to all its accessions, improvements, growing fruits and rents or income (Art. 2102) as well as to the proceeds of insurance should the property be destroyed, or the expropriation value of the property should it be expropriated.



Right of creditor against transferee of mortgaged property.

The fact that the mortgagor has transferred the mortgaged property to a third person does not relieve him from his obligation to pay the debt to the mortgage creditor in the absence of novation.

Art. 2130. A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.


Foreclosure; defined

Is the remedy avoidable to the mortgagee by which he subject the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given.

Kinds of foreclosure

1. Judicial Foreclosure (Rule 68, Rules of Court)

a. Judicial action for the purpose

A mortgaged may be foreclosed judicially by bringing an action for that purpose, in the proper court which has jurisdiction over the area wherein the real property involved or a portion thereof, is situated.

b. Order to mortgagor to pay mortgage debt.

If the court finds the complaint to be well-founded, it shall order the mortgagor to pay the amount due upon the mortgage debt or obligation with interest and other charges within a period of not less than 90 days nor more than 120 days from the entry of judgment.

c. Sale to highest bidder at public auction.

If the mortgagor fails to pay at the time directed in the order, the court, upon motion, shall order the property to be sold to the highest bidder at public auction.

d. Confirmation of sale

The sale when confirmed by an order of the court, also upon motion, shall operate to divest the rights of all parties to the action and to vest their rights in the purchaser subject to such right of redemption as may be allowed by law.

e. Execution of judgment

No judgment rendered in an action for foreclosure of mortgage can be executed otherwise than in the manner prescribed by the law on mortgages, because parties to an action are not authorized to change the procedure which it prescribed.

f. Application of proceeds of sale

The proceeds of the sale be applied to the payment of the;

1. cost of the sale

2. the amount due the mortgagee

3. claims of junior encumbrances or persons holding subsequent

mortgages in the order of their priority, and

4. the balance, if any, shall be paid to the mortgagor or his duly

authorized agent, or to the person entitled to it.

g. Execution of Sheriffs certificate

The foreclosure is not complete until the sheriffs certificate is executed, acknowledged and recorded.

2. Extra judicial foreclosure (act. No. 3135)

a. Express authority to sell given to mortgage.

b. Authority not extinguished by death of mortgagor or mortgagee.

A mortgage may be foreclosed extrajudicially where there is inserted in the contract a clause giving the mortgagee the power, upon default of the debtor, to foreclose the mortgage by an extrajudicial sale of the mortgaged property.

c. Public sale after proper notice

The sale, which cannot be made legally outside of the province in which the property is situated shall be made at public auction after the giving of proper notice which consists in the posting of the notice of the sale in at least three (3) public places at the municipality or city where the property is situated and the publication thereof in a newspaper of general circulation in said municipality or city.

d. Payment of cash by highest bidder

Where the highest bidder is the mortgagee and the amount of his bid represented the total mortgage debt, it is not necessary for him to pay cash. It would serve no purpose for the sheriff to go through the ceremony of receiving the money and paying it back to the creditor.

e. Nature of surplus proceeds from foreclosure sale

Surplus money arising from a sale of real property like land under foreclosure stands in the same place of the land itself with respect to liens thereon or vested right therein.

f. Redemption of property sold

The debtor has the right to redeem the property sold within the term of one year from and after the date of the sale. The reckoning date in cases of registered land is from the registration of the certificate of sale since it is only from the date that the sale takes effect as a conveyance. In case of juridical persons, they have the right to redeem the property until, but not after the registration of the certificate of foreclosure sale which in no case shall be more than three (3) months after foreclosure, which ever is earlier.

g. Remedy of party aggrieved by foreclosure

The debtor may, the proceedings in which possession was requested, petition that the sale be set aside and the writ of possession cancelled, because the mortgage was not violated or the sale was not made in accordance with the provisions thereof.

Right of mortgage to recover deficiency

1. Mortgage merely security, not a satisfaction of an obligation

If there be a balance due to the mortgagee after applying the proceeds of the sale, the mortgagee is entitled to recover the deficiency. (Development Bank of the Phils. Vs. Mirang, 55SCRA 141).

In judicial foreclosure, the Rules of Court specifically gives the mortgagee the right to claim for deficiency in case deficiency exists, while Act. No. 3135 governing extrajudicial foreclosures of mortgage does not give a mortgagee the right to recover deficiency after the public auction sale, neither does it expressly or implied by prohibit such recovery.

2. Action for recovery of deficiency

If the deficiency is embodied in a judgment, it is referred to as deficiency judgment. It is the settled rule that a mortgagee may recover any deficiency in the mortgage account which is not realized in a foreclosure sale and that the action for the recovery of deficiency may be filed even during the period of redemption.

3. Prescriptive period of action

The action to recover a deficiency after foreclosure prescribes after ten (10) years from the time the right of action accrues as provided in Art. 1144 (2) of the Civil Code)

Effect of inadequacy of price in foreclosure sale

1. General Rule; exception

Where there is a right to redeem, inadequacy of price is not material because the judgment debtor may reacquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the auction sale.

Mere inadequacy of the price obtained at the sheriffs sale will not be sufficient to set aside the sale unless the price is so inadequate as to shock the conscience of the court taking into consideration the peculiar circumstances attendant thereto.

Options in case of death of debtor

The rule is that a secured creditor holding a real estate mortgage has three (3) district, independent, and mutually exclusive remedies in case of death of the debtor.

They are;

1. to waive the mortgage and claim the entire death from the estate of the mortgage as an ordinary claim.

2. to foreclose the mortgage judicially and prove any deficiency as an ordinary claim, and

3. to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription without right to file a claim for any deficiency.

Redemption; defined

Is a transaction by which the mortgagor requires or busy back the property which may have passed under the mortgage or divests the property of the lien which the mortgage may have created.

It is allowed in case of foreclosure in favor of banking and credit institutions and in extrajudicial foreclosures.

Kinds of Redemption: 1. Equity of Redemption

The right of the mortgagor in case of judicial foreclosure to redeem the mortgaged after his default in the performance of the conditions of the mortgage but before the confirmation of the sale of the mortgaged property.

2. Right of Redemption

The right of the mortgagor in case of extrajudicial foreclosure to redeem the mortgaged property within a certain period after it was sold for the satisfaction of the mortgage debt.

Period within which to exercise right

In all cases of extrajudicial sale, the mortgagor may redeem the property at any time within the term of one year from and after the date of registration of the certificate of sale with the appropriate Registry of Deeds.

Effect of failure to exercise right

If no redemption is made within the prescribed period, the purchaser has the absolute right to a writ of possession which is the final process to carry out or consummate the extrajudicial foreclosure. Henceforth, the mortgagor loses his right over the property.

Effect of exercise of right

What actually is effected is not the recovery of the property which ownership is never lost, but the elimination from his title thereto of the lien created by the levy or attachment or judgment or registration of the mortgage thereon. The redemption defeats the inchoate right of the purchase and restores the property to the same condition as if no sale had been made.

Where mortgaged property sold to a third party.

A sale by the mortgagor to a third party of the mortgaged property during the period for redemption transfers only the right to redeem the property and the right to passes, use and enjoy the same during said period. Under Rule 39, Sec. 31 of the Rules of Court, the judgment debtor remains in possession of the property foreclosed and sold, during the period of redemption, but he cannot make a conveyance of the ownership of the property as said ownership belongs to the purchaser at the foreclosure sale. (Dizon vs. Gabarro, 83SCRA 688 [1978])

Where sale not registered and made without consent of mortgagee.

The buyer was not validly substituted as debtor, and hence, had no right to redeem (Bonnevie vs. CA., 125 SCRA 122 [1983])

Where extrajudicial foreclosure effected with fraud

An extrajudicial foreclosure effected with fraud is null and void

Nature of mortgagors right of redemption

1. An absolute privilege

This right of redemption is an absolute privilege, the exercise of which it entirely dependent upon the will and discretion of the redemptioner.

2. A mere statutory privilege

It must be exercised in the made and within the period prescribed by the statute.

3. Involves title to foreclose property

An action to redeem by the mortgage debtor affects his title to the foreclosed property. If the action is seasonably made, it seeks to erase from the title of the judgment or mortgage debtor the lien created by registration of the mortgage and sale.

Requisites for valid redemption

1. Redemption must be made within one (1) year from the date of the registration of the certificate of sale.

2. Payment of the purchase price of the property plus 1% interest per month together with the taxes thereon, if any, paid by the purchaser and the amount of his prior her, if any, with the same rate of interest computed from the date of registration of the sale, up to the time of redemption, and

3. written notice of the redemption must be served on the officer who made the sale and a duplicate filed with the proper Register of Deeds.

Payment of redemption money

The payment of he redemption money may be made to the purchaser or redemption, or for him to the officer who made the sale. (Sec. 39, Rules of Court). It may be made to the sheriff. (Reyes vs. De los Santos, 50 SCRA 431).

Amount payable

In the redemption of mortgaged property, the rule is that the amount payable is no longer the judgment debt but the purchase price at the auction sale. Similarly, attorneys fees awarded by the trial court shall not be added to the redemption price because the amount payable is no longer the judgment but that which is stated in Sec. 30, Rule 39, Rules of Court. Persons entitled to exercise right of redemption

1. Mortgagor or one in privity of title with mortgagor

2. successor in interest

Equity of Redemption in judicial foreclosure

1. Period for exercise

In a judicial foreclosure of mortgages under Rule 68 of the Rules of Court, there is no right of redemption after the judicial sale is confirmed. There is only the equity of redemption in favor of the mortgagor consisting in the right to redeem the mortgaged property within the 90-day period from the order of foreclosure, or even thereafter but before confirmation of the sale.

2. Reckoning of the 90-day period

The 90-day period granted the mortgage debtor within which to pay the amount of the mortgage in Sec. 2, Rule 68 of the Rules of Court, is counted from the date of the service of such order. The order referred to in the Rule is the order requiring the debtor to pay the judgment within 90 days.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxANTICHRESIS

Art. 2132

Antichresis; defined

Is a contract whereby the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit.

Antichresis and pledge compared

1. Antichresis refers to real property, while pledge, to personal property.

2. antichresis is perfected by mere consent, while pledge is perfected by the delivery of the thing pledged, and

3. Antichresis is a consensual contract, while pledge is a real contract.

Antichresis and real mortgage compared

1. In antichresis, the property is delivered to the creditor, while in mortgage, the debtor usually retains possession of the property.

2. In antichresis, the creditor acquires only the right of receive the fruits of the property; hence, it does not produce a real right, while in mortgage, the creditor does not have any right to receive the fruits, but mortgage creates a real right over the property which is enforceable against the whole world.

3. In antichresis the creditor unless there is stipulation to the contrary, is obliged to pay the taxes and charges upon the estate (Art. 2135), while in mortgage, there is no such obligation on the part of the mortgagee.

Art. 2133

Measure of application of fruits to interest and principal.

The fruits of the immovable which is the object of the antichresis must be appraised at their actual market value at the time of the application (see Art. 2138).


Art. 2135

Obligation of the antichretic creditors

1. Payment of taxes and charges upon the estate (Art. 2135)

2. Application of the fruits of the estate (Art. 2132)

3. Bear the expenses necessary for its preservation and repair

Art. 2136

Exemption from the obligation imposed by the preceding Article.

The creditor, in order to exempt himself from the obligations imposed upon him by the preceding article, may always compel the debtor to enter again upon the enjoyment of the property, except when there is stipulation to the contrary.

Article. 2137. See Article

Remedy of creditor in case of non-payment of debt.

1. Bring an action for specific performance, or

2. petition for the sale of the real property as in a foreclosure of mortgages under Rule 68 of the Rules of Court.

The parties, however, may agree on an extrajudicial foreclosure in the same manner as they are allowed in contracts of mortgage and pledge (see Art. 1307).



xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxCHATTEL MORTGAGE

Art. 2140

Chattel mortgage; defined

Is that contract by virtue of which personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation.

Chattel mortgage and pledge; distinguished

1. In chattel mortgage, the delivery of the personal property to the mortgage is not necessary, while in pledge, such delivery is necessary.

2. In chattel mortgage, the registration of the same in the Chattel Mortgage Registry is not necessary.

3. In chattel mortgage, if the property is foreclosed, the excess over the amount due goes to the debtor, while in pledge, if the property is sold, the debtor is not entitled to the excess unless it is otherwise agreed.

4. In chattel mortgage, if the property is foreclosed and there is a deficiency, the creditor is entitled to recover the deficiency from the debtor, except if the chattel mortgage is a security for the purchase of personal property in installments. In pledge, if the property is sold, and there is a deficiency, the creditor is not entitled to recover the deficiency not withstanding any stipulation to the contrary (Art. 2115).


Offenses involving chattel mortgage

Under the Revised Penal Code, the following acts are punishable.

1. Knowingly removing any personal property mortgaged under the Chattel Mortgage Law to any province or city other than the one in which it was located at the time of execution of the mortgage without the written consent of the mortgagee.

2. Selling or pledging personal property already mortgaged, or any part thereof, under the terms of the Chattel Mortgage Law without the consent of the mortgage written on the back of the mortgage and duly recorded in the Chattel Mortgage Register.

An essential element common to the two acts punished under Art. 319 of the RPC is that the property removed or repledged, as the case may be, should be the same or identical property that was mortgaged or pledged before such removal or pledging.

Subject matter of Chattel Mortgage

1. Shares of stock in a corporation (Chua Geran vs Samahan 62 Phil. 472)

2. An interest in business

3. Machinery treated by the parties as personal property.

4. Vessels

5. Motor

6. House of mixed materials

7. House intended to be demolished

8. House built on rented land

Period within which registration should be made

The law is substantially and sufficiently complied with where the registration is made by the mortgage before the mortgagor has complied with his principal obligation and no right of third persons is prejudiced.

Effect of registration

The registration of the chattel mortgage is an effective and finding notice to other creditors of its existence and creates a real right or a lien which, being recorded, follows the chattel whenever it goes. The registration gives the mortgages symbolical possession.

Registration adds nothing to the instrument, considered as a source of title and affects nobodys rights except as a species of notice.

Duty of Register of Deeds

Ministerial

Affidavit of good faith required

The affidavit of good faith is an oath in a contract of chattel mortgage wherein the parties severally swear that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purposes and that the same is a just and valid obligation and one not entered into for the purposed of fraud.

Effect of absence of the affidavit of good faith

The absence of the affidavit vitiates a mortgage only as against third persons without notice like creditors and subsequent encumbrances.

The affidavit is required only for the purpose of transforming and already valid mortgage into preferred mortgage. Thus, it is not necessary for the validity of the Chattel Mortgage itself but only to give it a preferred status.

Period to foreclose mortgage

1. Chattel Mortgage

The mortgage may, after 30 days from the time of the condition broken, cause the mortgaged property to be sold at public auction by a public officer.

The 30 day period to foreclose a chattel mortgage is the minimum period after violation of the mortgage condition for the mortgage creditor to cause the sale at public auction of the mortgaged chattel with at least ten (10) days notice to the mortgagor and posting of public notice of time, place, and purpose of suck sale, and is a period of grace for the mortgagor, to discharge the mortgage obligation.

2. Real Estate Mortgage

In case of judicial foreclosure, the grace period for the mortgagor to pay the amount due is not less than 90 days nor more than 120 days from the entry of judgment on foreclosure. In default of suck payment the property shall be sold at public auction to satisfy the judgment.

Application of proceeds of sale

The proceeds of the sale are to be applied to the payment of the following.

1. Cost and expenses of keeping and sale

2. Payment of the obligation secured by the mortgage

3. Claims of persons holding subsequent mortgages in their order

4. The balance, if any, shall be paid to the mortgagor, or person holding under him

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxCONCURRENCE AND PREFERENCE OF CREDITS

Concurrence of credits; defined

It implies the possession by two or more creditors of equal rights or privileges over the same property or all of the property of a debtor.

Reference of credit; defined

Is the right held by a creditor to be preferred in the payment of his claim above others out of the debtors assets.

Art. 2236

As a rule, the debtor is liable with all his property, present and future, for the fulfillment of his obligations.

To this rule, the law provides for property which are exempt from such fulfillment.

1. The judgment obligors family home as provided by law or the homestead in which he resides, and land necessarily used in connection therewith.

2. Ordinary tools and implements personally used by him in his trade, employment, or livelihood.

3. Three horses, or three cows, or three carabaos, or other beast of burden, such as the judgment obligor may select, necessarily used by him in his ordinary occupation.

4. His necessary clothing, and articles for ordinary personal use, excluding jewelry

5. Household furniture and utensils necessary for housekeeping.

6. Provisions for individual or family use sufficient for four months.

7. The professional libraries of judges, lawyers, physicians, pharmacists, dentists, engineers, surveyors, clergyman, teachers, and other professionals, not exceeding three hundred thousand pesos in value.

8. One fishing boat and accessories, not exceeding the total value of one hundred thousand pesos, owned by a fisherman and by the lawful use of which he earns his livelihood.

9. Salaries, wages, or earnings of the judgment debtor for his personal services within the four months preceding the levy as are necessary for the support of his family.

10. Lettered gravestones

11. Moneys, benefits, privileges, or annuities accruing out of any life insurance.

12. The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the government.

13. Properties especially exempted by law.


Art. 2238

Exemption of conjugal partnership or absolute community property.

The assets of the conjugal partnership or the absolute community do not pass to the assignee in insolvency elected by the creditors or appointed by the court as they do not belong to the individual spouses, but a distinct entity the partnership or the community. The exemption applies provided that:

1. The partnership or community subsists; and

2. The obligations of the insolvent spouse have not redounded to the benefit of the family.

Art. 2239

Rule involving undivided share or interest of a co-owner

If there is co-ownership and one of the co-owners is the insolvent debtor, his undivided share or interest in the property shall be possessed by the assignee in insolvency proceedings because it is part of his assets.

The share of the other co-owners cannot of course, be taken possession of by the assignee.

Art. 2240

Rule involving property held in trust

The trustee is not, strictly speaking the owner of the trust property although he has the legal little thereto. Hence, property held in trust by the insolvent debtor should be excluded from the insolvency proceedings.

Concurrence and Preference of Credits

Order of Payment

After the debtors assets have been liquidated unless a composition has been agreed upon by the creditors obligations of the debtor shall be paid in the following order.

1. Equitable claims enumerated in Sec.48 of the insolvency Law.

2. Preferred claims under arts.2241 and 2242 of the civil code.

3. Preferred claims under art.2244 of the civil code and

4. Ordinary claims under Sec.49 of the insolvency Law.

Equitable claims

The equitable claims enumerated in Sec.48 of the Insolvency law which are entitled to first

priority in payment are

1. Paraphernal property of the debtors wife

2. Property held by under lease or usufruct or on deposit or for administration.

3. Merchandise held by debtor on commission, for forwarding or on consignment and purchase price from sales on consignment.

4. Negotiate instrument sent to debtor for collection and the money collect thereby.

5. Money in debtors possession for remittance to others.

6. Merchandize bought on credit; if no delivery has been made.

7. Goods wrongfully taken by the debtor.

Preferred claims under the civil code:

Arts. 2241, 2242 and 2244 of the civil code lays over the rules with respect to preference and concurrence of credits.

A. Art. 2241

With respect to specific movable property of debtor, the following claims are preferred.

1. Taxes.

2. Claims arising from malversation.

3. Vendors lien

4. Claims secured by pledge on chattel mortgage.

5. Mechanics lien

6. Lien of laborers for wages over goods manufactured.

7. Salvage

8. Tenancy

9. Carriers lien

10. Innkeepers lien

11. Crop loan

12. Rentals for one year

13. Property on deposit that has been wrongfully sold.

B. Art. 2242

With respect to specific real property, the following claims shall be preferred

1. Taxes

2. Unpaid price realty

3. Contractors lien

4. Lien of suppliers of materials

5. Mortgage credits upon registered real estate mortgages.

6. Reimbursable expenses for improvement and prevention of real estate.

7. Credits or property upon which attachments or executions have been made.

8. Claims of co-heirs for warranty in the partition of an immovable among them.

9. Claims of donors for pecuniary or other charges on the immovable donated; and

10. Claims of insurers upon insured property, for premiums not exceeding two years.

C. Art. 2244

With respect to property other than those enumerated in arts 2241 and 2242, in the order named;

1. Funeral expenses of debtor and his children.

2. Credits for services rendered by employees and household help.

3. Expenses incurred during last illness of debtor, his spouse and children.

4. Compensation due laborers in cases of labor accident or illness resulting from nature of employment.

5. Debts incurred by debtor for support of his family during the year proceeding insolvency.

6. Support during insolvency proceedings and for three months thereafter.

7. Fines and civil indemnifications a5rising from crime.

8. Legal and other expenses for administration of insolvents estate.

9. Taxes due national government.

10. Taxes due provincial government

11. Taxes due city or municipal government.

12. Damage arising from a quasi-delict or tort.

13. Gifts due to charitable institutions, and

14. Credits without special privilege appearing in a public document or resulting from a final judgment.

( Prepared by the CIVIL LAW SECTION ( Chief NORBERT OBEDOZA Assistant Chief JOHN PAUL MARTIN Members LIWLIWA AGBAYANI, ELMER PEDROZO, ALLAN ANCHETA, JONATHAN FERNANDEZ, GARY DE GUZMAN, EIGEE GALACGAC and YVALLONE LAMATON. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE OF LAW BAR OPERATIONS ( 2003.

credit transactions 2003

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