WAREHOUSE RECEIPTS LAW
QUAMTO in the care and custody of the things
Surrendering of Possession; Lien (2009)
A lien is dependent on possession. When a
warehouseman surrenders possession, he
thereby loses his lien on the goods over which
hi no longer has possession
Delivery of Goods (2007)
A. The warehouseman should deliver the
goods upon demand to Caloy who is a holder
of the receipt in good faith and for value. The
goods cannot be levied upon by the creditor
of Alex after it was negotiated to Caloy
(Section 25, Negotiable Instruments Law).
B. My answer would not be the same if the
warehousemen issued a non- negotiable
warehouse receipt. In such case. The
warehouseman should deliver the goods to
Datio, if the notice of levy was served on the
warehouseman prior to the notification of the
warehouseman by Alex or Caloy of the
transfer of the non-negotiable receipt. In such
case, the title of Caloy would be defeated by
the notice of levy by Dario (Section 42,
Warehouse Receipts Law).
a. should deliver the goods to Caloy. Under
the Billy Warehouse Receipts Act, the goods
covered by the negotiable receipt cannot be
attached or levied upon directly by the
creditor. The creditor must resort to attaching
or levying the receipt itself, not the goods,
while in the possession of the debtor, Alex.
Since Alex has already negotiated it to Caloy,
Dario cannot anymore attach or levy the
goods under the warehouse receipt.
b. A non-negotiable warehouse receipt is
transferred thru simple assignment. Since
Alex negotiated it instead of having it
assigned, the conveyance of the warehouse
receipt to Caloy is not valid; hence, Alex is still
the owner of the said goods. Dario could now
attach or levy the goods.
(2015)
a. EJ has better right to the goods. The goods
are covered by a negotiable warehouse
receipt which was indorsed to EJ for value.
The negotiation to EJ was not impaired by the
fact that Jojo took the goods without the
consent of Melchor, as EJ had no notice of
such fact. Moreover, EJ is in possession of the
warehouse receipt and only he can surrender
it to the warehouseman. (Sec. 8, Warehouse
Receipts Law)
b. Under the Sec. 17 of Act 2137, Warehouse
Receipt Law, SN Warehouse Corporation may
file an action for interpleader and implead EJ
and Melchor to determine who is entitled to
the said goods.
(2000 Bar)
The stipulation that W would not be
responsible for the loss of all or any portion of
the hardware materials covered by the
receipt even if such loss is caused by the
negligence of W or his representative or
employees is void. The law requires that a
warehouseman should exercise due diligence (b) an offer to surrender the receipt, if
negotiable, with such indorsements as would
deposited in his warehouse. be necessary for the negotiation thereof, and
(c) readiness and willingness to sign when the
(1999 Bar) goods are delivered if so requested by the
a. The 1000 bags of rice were delivered to the warehouseman.
Warehouse Company by a merchant, and a
negotiable receipt was issued therefore. The (1988)
rice cannot thereafter, while in possession of a. Mr. Tigas would have preference over the
the Warehouse Company, be attached by goods covered by the negotiable warehouse
garnishment or otherwise, or be levied upon receipt (assuming that there was proper
under an execution unless the receipt be first negotiation to him). In negotiation, the
surrendered to the warehouseman, or its transferee’s rights over the goods vests from
negotiation enjoined. The Warehouse the very moment of transfer and the
Company cannot be compelled to deliver the transferee thereupon acquires the direct
actual possession of the rice until the receipt obligation of the warehouseman to hold the
is surrendered to it or impounded by the goods for him.
court. b. Mr. Tapang, in this case, would have
preference over the goods since the
b. Yes. The rice mill, as a holder for value of transferee of a non-negotiable warehouse
the receipt, has a better right to the rice than receipt merely acquires (1) rights no better
the creditor. It is rice mill that can surrender than those of the transferor and (2) the direct
the receipt which is in its possession and can obligation of the warehouseman only upon
comply with the other requirements which notice to him of the transfer.
will oblige the warehouseman to deliver the
rice, namely, to sign a receipt for the delivery (1998)
of the rice, and to pay the warehouseman’s 1. A bill of lading may be defined as a written
lien and fees and other charges. acknowledgement of the receipt of goods and
an agreement to transport and to deliver
(1998 Bar) them at a specified place to a person named
There was a valid negotiable receipt as there therein or on his order.
was a valid delivery of 200 cavans of rice for
deposit. In such case, the warehouseman 2. A bill of lading has a two-fold character,
(LWC) is not obliged to deliver the 200 cavans namely, a) it is a receipt of the goods to be
of rice deposited to any person, except to one transported; and b) it constitutes a contract of
who can comply with Section 8 of the carriage of the goods.
Warehouse Receipts law, namely:
(1) surrender the receipt of which he is a (1992)
holder;
(2) willing to sign a receipt for the delivery of
the goods; and
(3) pays the warehouseman’s liens, that is, his
fees and advances, if any.
(1993 Bar)
1. B has a better right than S. The right of the
unpaid seller, S, to the goods was defeated by
the act of A in endorsing the receipt to B.
2. The warehouseman can be obliged to
deliver the palay to A if B negotiates back the
receipt to A. In that case, A becomes a holder
again of the receipt, and A can comply with
Sec. 8 of the Warehouse Receipts Law.
(1992 Bar)
The pledgor should bear the loss. In the
pledge of a warehouse receipt the ownership
of the goods remain with depositor or his
transferee. Any contract of real security,
among them a pledge, does not amount to or
result in an assumption of risk of loss by the
creditor. The Warehouse Receipts Law did not
deviate from this rule.
(1991 Bar)
The warehouseman is bound to deliver the
goods upon demand made either by the
holder of the receipt for the goods or by the
depositor if the demand is accompanied by
(a) an offer to satisfy the warehouseman’s
lien,
 LOAN
(1993, 1996, 1998, 2001, 2004, 2005, 2016
BAR) (computing legal interest)
1. When the obligation is breached and it
consists in the payment of sum of money like
a loan or forbearance of money, in the
absence of stipulation, the rate of interest
shall be the legal rate of 6% per annum, (Art.
2209, CC) which was increased to 12% per NB
Circular No. 905, series of 1982 to be
computed from default. The twelve percent
(12%) per annum legal interest shall apply
only until June 30, 2013. From July 1, 2013,
the new rate of six percent (6%) per annum
shall be the prevailing rate of interest when
applicable. (Nacar v. Gallery Frames, 703
SCRA 439 [2013], applying BSP-MB Circular
No. 799)

2. The interest on the amount of damages

awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No
interest, however, shall be adjudged on
unliquidated claims or damages, exept when
or until the demand can be established with
reasonable uncertainty. Accordingly, where
the demand is established with reasonable
certainty, the interest shall begin to run from
the time the claim is made judicially or extra-
judicially, but when such certainty cannot be
so reasonably established at the time the
demand is made, the interest shall begin to
run only from the date the judgment of the
court is made (at which time the
quantification of damages may be deemed to
have been reasonably ascertained). The
actual base for the computation of legal
interest shall, in any case, be on the amount
finally adjudged. (Nacar v. Gallery Frames,
703 SCRA 439 [2013])
 COMMODATUM
(1993)
1) The contract is called "commodatum". [Art.
1933. Civil Code)
2) No, B is not obliged to pay A for the use of
the passenger Jeepney because
commodatum Is essentially gratuitous. (Art.
1933. Civil Code]
3) Yes, because B devoted the thing to a
purpose different from that for which it has
been loaned (Art. 1942, par. 2, Civil Code)
Alternative Answer:
No, because an obligation which consists in
the delivery of a determinate thing shall be
extinguished if it should be lost or destroyed
without the fault of the debtor, and before he
has incurred in delay. (Art. 1262. Civil Code)
(1977)
Differentiate mutuum from commodatum.
In mutuum, the object is money or any
consumable (fungible) thing; in
commodatum, the object is, as a general rule,
a non-consumable (non-fungible) thing.
The former may or may not be gratuitous; the
latter is essentially gratuitous.
The purpose of the former is consumption;
the purpose of the latter is use. In the former,
ownership passes to the debtor; in the latter,
ownership remains with the bailor.
In the former, the debtor must pay or return
an equal amount of the same kind or quality;
in the latter, the bailee must return the
specific thing loaned.
(1998)
Distinguish usufruct from commodatum and
state whether these may be constituted over
consumable goods.
1. Usufruct is a right given to a person
(usufructuary) to enjoy the property of
another with the obligation of preserving its
form and substance.
On the other hand, commodatum is a
contract by which one of the parties (bailor)
delivers to another (bailee) something not
consumable so that the latter may use it for a
certain time and return it.
In usufruct the usufructuary gets the right to
the use and to the fruits of the same, while in
commodatum, the bailee only acquires the
use of the thing loaned but not its fruits.
Usufruct may be constituted on the whole or
a part of the fruits of the thing. (Art. 564. Civil
Code). It may even be constituted over
consumables like money (Alunan v. Veloso, 52
Phil. 545). On the other hand, in
commodatum, consumable goods may be
subject thereof only when the purpose of the
contract is not the consumption of the object,
as when it is merely for exhibition.
(1983)
The bailee in a commodatum is liable for the
loss of the thing loaned even if thru a
fortuitous event where, being able to save it
or his own thing, he chose to save the latter.
(1990)
1) The contract is called "commodatum". [Art.
1933. Civil Code). COMMODATUM is a
contract by which one of the parties (bailor)
delivers to another (bailee) something not
consumable so that the latter may use it for a
certain time and return it
2) No, B is not obliged to pay A for the use of
the passenger Jeepney because
commodatum is essentially gratuitous. (Art.
1933. Civil Code
3) Yes, because B devoted the thing to a
purpose different from that for which it has
been loaned (Art. 1942, par. 2, Civil Code)
(2005)
A. Tito must bear the P15,000.00 expenses for
the van. Generally, extraordinary expenses
for the preservation of the thing loaned are
paid by the bailor, he being the owner of the
thing loaned. In this case however, Tito should
bear the expenses because he incurred the
expenses without first informing Pedro about
it. Neither was the repair shown to be urgent.
Under Article 1949 of the Civil Code, bailor
generally bears the extraordinary expenses
for the preservation of the thing and should
refund the said expenses if made by the
bailee; Provided, The bailee brings the same
to the attention of the bailor before incurring
them, except only if the repair is urgent that
reply cannot be awaited.
ALTERNATIVE ANSWER:
The P15,000.00 spent for the repair of the van
should be borne by Pedro. Where the bailor
delivers to the bailee a non-consummable
thing so that the latter may use it for a certain
time and return the identical thing, the
contract perfected is a Contract of
Commodatum. (Art. 1933, Civil Code) The
bailor shall refund the extraordinary expenses
during the contract for the preservation of the
thing loaned provided the bailee brings the
same to the knowledge of the bailor before
incurring the same, except when they are so
urgent that the reply to the notification
cannot be awaited without danger. (Art. 1949
of the Civil Code)
In the given problem, Pedro left his Adventure
van with Tito so that the latter could use it for
one year while he was in Riyadh. There was no
mention of a consideration. Thus, the
contract perfected was commodatum. The
amount of P15,000.00 was spent by Tito to
tune up the van and to repair its brakes. Such
expenses are extra-ordinary expenses
because they are necessary for the
preservation of the van Thus, the same should
be borne by the bailor, Pedro.
B. Tito must also pay for the ordinary
expenses for the use and preservation of the
thing loaned. He must pay for the gasoline, oil,
greasing and spraying. He cannot ask for Usufruct is a right given to a person
reimbursement because he has the obligation (usufructuary) to enjoy the property of
to return the identical thing to the bailor. another with the obligation of preserving its
Under Article 1941 of the Civil Code, the form and substance. (Art. 562, Civil Code)
bailee is obliged to pay for the ordinary
expenses for the use and preservation of the On the other hand, commodatum is a
thing loaned. contract by which one of the parties (bailor)
delivers to another (bailee) something not
C. No, Pedro does not have the right to consumable so that the latter may use it for a
retrieve the van before the lapse of one year. certain time and return it.
The parties are mutually bound by the terms
of the contract. Under the Civil Code, there In usufruct the usufructuary gets the right to
are only 3 instances when the bailor could the use and to the fruits of the same, while in
validly ask for the return of the thing loaned commodatum, the bailee only acquires the
even before the expiration of the period. use of the thing loaned but not its fruits.
These are when: (1) a precarium contract was
entered (Article 1947); (2) if the bailor Usufruct may be constituted on the whole or
urgently needs the thing (Article 1946); and a part of the fruits of the thing. (Art. 564, Civil
(3) if the bailee commits acts of ingratitude Code) It may even be constituted over
(Article 1948). Not one of the situations is consumables like money (Alunan v. Veloso,
present in this case. 52 Phil. 545). On the other hand, in
commodatum, consumable goods may be
The fact that Tito had leased the thing loaned subject thereof only when the purpose of the
to Annabelle would not justify the demand for contract is not the consumption of the object,
the return of the thing loaned before as when it is merely for exhibition. (Art. 1936,
expiration of the period. Under Article 1942 of Civil Code)
the Civil Code, leasing of the thing loaned to a
third person not member of the household of
the bailee, will only entitle bailor to hold
bailee liable for the loss of the thing loaned.
D. Generally, extraordinary expenses arising
on the occasion of the actual use of the thing
loaned by the bailee, even if incurred without
fault of the bailee, shall be shouldered equally
by the bailor and the bailee. (Art. 1949 of the
Civil Code). However, if Pedro had an urgent
need for the vehicle, Tito would be in delay for
failure to immediately return the same, then
Tito would be held liable for the extraordinary
expenses.
(1998)
1. USUFRUCT is a right given to a person
(usufructuary) to enjoy the property of
another with the obligation of preserving its
form and substance. (Art. 562. Civil Code)
On the other hand, COMMODATUM is a
contract by which one of the parties (bailor)
delivers to another (bailee) something not
consumable so that the latter may use it for a
certain time and return it.
In usufruct the usufructuary gets the right to
the use and to the fruits of the same, while in
commodatum, the bailee only acquires the
use of the thing loaned but not its fruits.
Usufruct may be constituted on the whole or
a part of the fruits of the thing. (Art. 564. Civil
Code). It may even be constituted over
consumables like money (Alunan v. Veloso,
52 Phil. 545). On the other hand, in
commodatum, consumable goods may be
subject thereof only when the purpose of the
contract is not the consumption of the object,
as when it is merely for exhibition. (Art. 1936,
Civil Code)
(1998)
 MUTUUM
(1975)
Yes, the creditor can recover the principal
together with legal interest thereon from the
date of demand (Art. 2209), and legal interest
on the interests paid in excess of the lawful
rate from the date of payment (Art. 1413),
The usurious interest, that is to say, the whole
usurious interest can not be recovered,
because of Article 1413 of the Civil Code and
Section 6 of the Usury Law. However, the
illegality of the stipulation concerning the
usurious interests does not affect the
creditor's right to recover the principal,
inasmuch as a contract of loan with usurious
interest is a divisible contract. The illegal
terms can be separated from the legal ones
(2001)
The action will prosper. While it is true that
the interest ceilings set by the Usury Law are
no longer in force, it has been held that PD No.
1684 and CB Circular No. 905 merely allow
contracting parties to stipulate freely on any
adjustment in the interest rate on a loan or
forbearance of money but do not authorize a
unilateral increase of the interest rate by one
party without the other's consent (PNB v. CA,
238 SCRA 2O [1994]]).
To say otherwise will violate the principle of
mutuality of contracts under Article 1308 of
she Civil Code. To be valid, therefore, any
change of interest must be mutually agreed
upon by the parties (Dizon v, Magsaysay, 57
SCRA 25O [1974]). In the present problem, the
debtor not having given his consent to the
increase in interest, the increase is void.
unilateral increase of the interest rate by one
party without the other's consent (PNB v. CA,
238 SCRA 2O [1994]]). To say otherwise will
violate the principle of mutuality of contracts
under Article 1308 of the Civil Code. To be
valid, therefore, any change of interest must
be mutually agreed upon by the parties (Dizon
v, Magsaysay, 57 SCRA 25O [1974]). In the
present problem, the debtor not having given
his consent to the increase in interest, the
increase is void.
(2004)
OB's action is not just and valid. The debtor
cannot be required to pay the increase in
interest there being no law authorizing it, as
stipulated in the contract. Increasing the rate
in the absence of such law violates the
principle of mutuality of contracts
(2012)
No, Art. 1956, Civil Code, provides that “no
interest shall be due unless it has been
expressly stipulated in writing.”
Yes, Solutio Indebiti is applicable because
Villanueva Overpaid by P600,000.00
representing interest payment which is not
due. He can, therefore, demand its return.

(2002)
With respect to the collection of money or
promissory note, it being a forbearance of
money, the legal rate of interest for having
defaulted on the payment of 12% will apply.
With respect to the damages to the painting,
it is 6% from the time of the final demand up
to the time of finality of judgment until
judgment credit is fully paid. The court
considers the latter as a forbearance of
money.

(2004)
In MUTUUM, the object borrowed must be a
consumable thing the ownership of which is
transferred to the borrower who incurs the
obligation to return the same consumable to
the lender in an equal amount, and of the
same kind and quality. In COMMODATUM,
the object borrowed is usually a non-
consumable thing the ownership of which is
not transferred to the borrower who incurs
the obligation to return the very thing to the
lender.

(2001)
The action will prosper. While it is true that
the interest ceilings set by the Usury Law are
no longer in force, it has been held that PD No.
1684 and CB Circular No. 905 merely allow
contracting parties to stipulate freely on any
adjustment in the interest rate on a loan or
forbearance of money but do not authorize a
 DEPOSIT
(1987)
If the depository by force majeure loses the
thing and receives money or another thing in
its place, he shall deliver the sum or other
thing to be depositor. There being no showing
that there was anything received in place of
the things deposited, the Alto Bank is not
liable for the contents of the safety box.
(1992)
B would have no right to claim the money.
Article 1990 of the Civil Code is not applicable.
The law refers to another thing received in
substitution of the object deposited and is
predicated upon something exchanged.
The Mayor of Manila cannot invoke. Article
719 of the Civil Code which requires the finder
to deposit the thing with the Mayor only
when the previous possessor is unknown.
persons are reciprocally creditor and debtor
of each other. In this connection, it has been
held that the relation existing between a
depositor and a bank is that of creditor and
debtor. xxx As a general rule, a bank has a
right of set off of the deposits in its hands for
the payment of any indebtedness to it on the
part of a depositor.” Hence, compensation
took place between the mutual obligations of
X and Y Bank.
(1997)
Yes, he can recover the deficiency. The action
of AB to go after the surety bond cannot be
taken to mean a waiver of his right to demand
payment for the whole debt. The amount
received from the surety is only payment pro
tanto, and an action may be maintained for a
deficiency debt.

In this case , a must return the bag of money

to the bank as the previous possessor and
known owner (Arts. 719 and 1990. Civil Code.

(1997)
We submit that there is no pactum
commissorium here. Deposits of money in
banks and similar institutions are governed by
the provisions on simple loans (Art. 1980. Civil
Code). The relationship between the
depositor and a bank is one of creditor and
debtor. Basically this is a matter of
compensation as all the elements of
compensation are present in this case.

(1992)
B would have no right to claim the money.
Article 1990 of the Civil Code is not applicable.
The law refers to another thing received in
substitution of the object deposited and is
predicated upon something exchanged.

The Mayor of Manila cannot invoke. Article

719 of the Civil Code which requires the finder
to deposit the thing with the Mayor only
when the previous possessor is unknown.

In this case , a must return the bag of money

to the bank as the previous possessor and
known owner (Arts. 719 and 1990. Civil Code.)

(1997, 1998 BAR) (encashed the deposit)

There is no pactum commissorium here.
Deposits of money in banks and similar
institutions are governed by the provisions on
simple loans (Art. 1980). The relationship
between the depositor and a bank is one of
creditor and debtor. Basically this is a matter
of compensation as all the elements of
compensation are present in this case .

(1998)
Y Bank is correct. Art. 1287, Civil Code, does
not apply. All the requisites of Art. 1279, Civil
Code are present. In the case of Gullas v. PNB
(62 Phil. 519), The Supreme Court held: “The
Civil Code contains provisions regarding
compensation (set off) and deposit. These
portions of Philippine Law provide that
compensation shall take place when two
 SURETY
(1975)
No, the surety is not entitled to recover the
deficiency. Article 2115 of the Civil Code
provides that in the foreclosure of a pledge, if
the price of the sale is less than the
indebtedness secured by the pledge, the
creditor shall not be entitled to recover the
deficiency, notwithstanding any stipulation to
the contrary. By electing to sell the articles
pledged, the creditor waived any other
remedy, and must abide by the results of the
sale. No deficiency is recoverable.

(1997)
Yes, he can recover the deficiency. The action
of AB to go after the surety bond cannot be
taken to mean a waiver of his right to demand
payment for the whole debt, The amount
received from the surety is only payment pro
tanto, and an action may be maintained for a
deficiency debt.
 GUARANTY
(2009)
FALSE. An oral contract of guaranty, being a
special promise to answer for the debt of
another, is unenforceable unless in writing
(Article 1403 [2] b, NCC ).

ALTERNATIVE ANSWER:
TRUE. An oral promise of guaranty is valid and
binding. While the contract is valid, however
,it is unenforceable because it is not writing .
Being a special promise answer for the debt,
or miscarriage of another, the Statute of
Frauds requires it to be in writing to be
enforceable ( Article 1403 [2] b, NCC).The
validity of the contract should be
distinguished from its enforceability .

(2010)
Guaranty and Suretyship distinguished
(1) The obligation in guaranty is secondary;
whereas, in suretyship, it is primary.

(2) In guranty, the undertaking is to pay if the

principal debtor cannot pay; whereas, in
suretyship, the undertaking is to pay if the
principal debtor does not pay .

(3)In guranty, the guarantor is entitled to the

benefit of excussion; whereas, in suretyship
the surety is not entitled.

(4) Liability in guaranty depends upon an

independent agreement to pay the
obligations of the principal if he fails to do so;
whereas, in suretyship, the surety assumes
liability as a regular party.

(5) The Guarantor insures the solvency of the

principal debtor; whereas, the surety insures
the debt

(6) In a guaranty, the guarantor is subsidiarlty

liable; whereas, in a suretyship, the surety
binds himself solidarity with the principal
debtor (Art 2047, Civil Code).
 ANTICHRESIS
(1995)
1. A contract of antichresis was entered into
between Olivia and Peter. Under Article 2132
of the New Civil Code, by a contract of
antichresis 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, and thereafter to
the principal of his credit.
mortgage the fruits are not applied to the
principal obligation.
2, In antichresis, the creditor is in possession.
In mortgage, the debtor is in possession.
3. The principal and interest must be in
writing for validity. In mortgage, registration
is required to bind third persons.
4, In antichresis, the creditor pays the taxes.
In mortgage, taxes are not imposed on the
creditor.

2. Peter must pay taxes and charges upon the

land and bear the necessary expenses for
preservation and repair which he may deduct
from the fruits. (Art, 2135, NCC)

3. The amount of the principal and interest

must be specified in writing, otherwise the
antichresis will be void. (Art. 2134, NCC)

4. No. Art. 2136 specifically provides that the

debtor cannot re-acquire the enjoyment of
the immovable without first having totally
paid what he owes the creditor. However, it is
potestative on the part of the creditor to do
so in order to exempt him from his obligation
under Art. 2135, NCC, The debtor cannot re-
acquire the enjoyment unless Peter compels
Olivia to enter again the enjoyment of the
property.

(1989)
Antichresis 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 interest if
owing and thereafter to the principal.

Pledge is an accessory and real contract

whereby the debtor delivers to the creditor
movable property as security for the
performance of a principal obligation upon
the fulfillment of which the thing pledged
shall be returned to the debtor.

A real estate mortgage is an accessory

contract whereby the debtor guarantees the
performance of the principal obligation by
subjecting real property or real right as
security for the performance of such
obligation.

By the contract of antichresis 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 distinguished from pledge;
1. Antichresis is consensual, pledge is a real
contract,
2. Antichresis involves real property, pledge
involves personal property.
3. In antichresis, the principal and the interest
must be provided in writing for validity. In
pledge, the date and description of the pledge
must be in a public instrument to affect third
persons.
Antichresis distinguished from mortgage;
1, In antichresis the fruits that are applied to
the interest and thereafter to the principal. In
 CHATTEL MORTGAGE
(1995)
Assuming that the aircraft was sold for P1
Million, there is no order of preference. The
P1 Million will all go to the bank as a chattel
mortgagee because a chattel mortgage under
Art. 2241 (4) NCC. defeats Art. 2244 (12) and
(14}. Art. 2241 (3) and (5) are not applicable
because the aircraft is no longer In the
possession of the creditor.
(1999)
In a contract of chattel mortgage possession
belongs to the creditor, while in a contract of
pledge possession belongs to the debtor.
A chattel mortgage is a formal contract while
a pledge is a real contract.
A contract of chattel mortgage must be
recorded in a public instrument to bind third
persons while a contract of pledge must be in
a public instrument containing description of
the thing pledged and the date thereof to
bind third persons.
(1977)
The debtor F bears the loss of the sugar.
Although the sugar was constructively
delivered by F to W, it was only a security for
the payment of the debt. The ownership of
the sugar remained with F. By reason of the
principle of res perit domino, the owner F
should bear the loss.
(1999)
(c) No, Y would not become the owner of the
land. The stipulation is in the nature of
pactum commissorium which is prohibited by
law. The property should be sold at public
auction and the proceeds thereof applied to
the indebtedness. Any excess shall be given to
the mortgagor.
(d) No, the answer would not be the same.
This is a valid stipulation and does not
constitute pactum commissorium. In pactum
commissorium, the acquisition is automatic
without need of any further action. In the
instant problem another act is required to be
performed, namely, the conveyance of the
property as payment (dacion en pago).
(2001)
1) The assignment was a mortgage, not a
cession, of the leasehold rights. A cession
would have transferred ownership to the
bank. However, the grant of authority to the
bank to sell the leasehold rights in case of
default is proof that no such ownership was
transferred and that a mere encumbrance
was constituted. There would have been no
need for such authority had there been a
cession.
2) No, the clause in question is not a pactum
commissorium. It is pactum commissorium
when default in the payment of the loan
automatically vests ownership of the
encumbered property in the bank. In the
problem given, the bank does not
automatically become owner of the property
upon default of the mortgagor. The bank has
to sell the property and apply the proceeds to
the indebtedness.
(1985)
1. With regard to the real estate mortgage, B
can foreclose the same because it includes
future loans. But with regard to the chattel
mortgage, B cannot foreclose because of the
affidavit of good faith which requires that it be
a just and valid debt, and, therefore, the
chattel mortgage can not cover future loans.
2. The mortgage is indivisible and therefore it
answers for both debts. Therefore, both
mortgages can be foreclosed.
(1989)
(1) Distinguish between a contract of real
estate mortgage and a contract of sale with
right of repurchase.
1. Real estate mortgage is an accessory
contract. A contract of sale with right of
repurchase is a principal contract.
2. Real estate mortgage involves no transfer
of title. A contract of sale involves a
conditional transfer of title.
3. Real estate mortgage involves no transfer
of possession. A contract of sale involves a
conditional transfer of possession.
4. In a real estate mortgage the creditor has
no rights to the fruits. In a contract of sale, the
vendee is entitled to the fruits.
5. In a real estate mortgage, upon default the
creditor is not the owner. In a contract of sale,
upon consolidation, the vendee is the owner.
(1999)
The equity of redemption is different from the
right of redemption. Equity of redemption is
the right of the mortgagor after judgment in a
judicial foreclosure to redeem the property by
paying to the court the amount of the
judgment debt before the sale or
confirmation of the sale. On the other hand,
right of redemption is the right of the
mortgagor to redeem the property sold at an
extra-judicial foreclosure by paying to the
buyer in the foreclosure sale the amount paid
by the buyer within one year from such sale.
(1991)
The complaint for the annulment of Catalino’s
Title will prosper. In the first place, the second
owner’s copy of the title secured by him form
the Land Registration Court is void ab initio,
the owner’s copy thereof having never been
lost let alone the fact that said second
owner’s copy of the title was fraudulently
procured and improvidently issued by the
Court. In the second place, the Transfer
Certificate of Title procured by Catalino is
equally null and void, it having been issued on
the basis of a simulated or forged Deed of
Sale. A forged deed is an absolute nullity and
conveys no title.
The mortgage in favor of Desiderio is likewise
null and void because the mortgagor is not the
owner of the mortgaged property. While it
may be true that under the “Mirror Principle”
of the Torrens System of Land Registration, a Moreover, the chattel mortgage is void
buyer or mortgagee has the right to rely on because it was not registered. Assuming that
what appears on the Certificate of Title, and it is valid, it does not bind the Bank because it
in the absence of anything to excite suspicion, was not annotated on the title of the land
is under no obligation to look beyond the mortgaged to the bank. Z cannot demand that
certificate and investigate the mortgagor’s the Bank pay him the loan Z extended to X,
title, this rule does not find application in the because the Bank was not privy to such loan
case at hand because here, Catalino’s title transaction.
suffers from two fatal infirmities, namely:
1. The fact that it emanated from a forged
deed of a simulated sale;
2. The fact that it was derived from a
fraudulently procured or improvidently issued
second owner’s copy, the real owner’s copy
being still intact and in the possession of the
true owner, Bruce.
The mortgage to Desiderio should be
cancelled without prejudice to his right to go
after Catalino and/or the government for
compensation from the assurance fund.
(1999)
In a contract of CHATTEL MORTGAGE
possession belongs to the creditor, while in a
contract of PLEDGE possession belongs to the
debtor.
A chattel mortgage is a formal contract while
a pledge is a real contract.
A contract of chattel mortgage must be
recorded in a public instrument to bind third
persons while a contract of pledge must be in
a public instrument containing description of
the thing pledged and the date thereof to
bind third persons.
(1999)
The equity of redemption is different from the
right of redemption. EQUITY OF REDEMPTION
is the right of the mortgagor after judgment in
a judicial foreclosure proceedings, within a
period of not less than 90 days, before the
sale or confirmation of the sale, to pay into
the court the amount of the judgment debt.
On the other hand, RIGHT OF REDEMPTION is
the right of the mortgagor, after the sale of
the mortgaged property, to redeem the
property by paying to the purchaser in the
sale or for him to the sheriff who made the
sale, the amount paid by him, with interest,
within one year from the sale. There is no
right of redemption, only equity of
redemption, in a judicial foreclosure under
the Rules of Court.
(1994, 2003)
No, Z’s demand is not valid. A building is
immovable or real property whether it is
erected by the owner of the land, by a
usufructuary, or by a lessee. It may be treated
as a movable by the parties to chattel
mortgage but such is binding only between
them and not on third parties (Evangelista v.
Alto Surety Col, Inc., G.R. No. L-11139, April
23, 1958). In this case, since the bank is not a
party to the chattel mortgage, it is not bound
by it, as far as the Bank is concerned, the
chattel mortgage, does not exist. Moreover,
the chattel mortgage does not exist.
 PLEDGE
(1986)
The C.C. on pledge provides that the
foreclosure of the pledge extinguishes the
principal obligation, whether the proceeds of
the sale are more, or less than the obligation.
Hence,
a) Matunod cannot recover the deficiency.
b) Matunod is entitled to keep the excess,
unless there is a stipulation to the contrary.
c) if it is a chattel mortgage, Matunod can still
recover the deficiency as there is no
prohibition in the Chattel Mortgage Law
similar to pledge and the excess, if any should
be returned to the mortgagor (Maganaka),
(1989)
Answer:
Debtor/pledgor is not entitled to the excess
unless the contrary is agreed upon. The
offspring shall pertain to the pledgor but is
subject to the pledge if there is no stipulation
to the contrary.
(1994)
No. Bilateral contracts cannot be changed
unilaterally. A pledge is only a subsidiary
contract, and Steve Is still indebted to Danny
for the amount of P400,000.00 despite the fall
in the value of the stocks pledged.
b) No. Danny's right as pledgee is to sell the
pledged shares at a public sale and keep the
proceeds as collateral for the loan. There is no
showing that the fall in the value of the
pledged property was attributable to the
pledger's fault or fraud. On the contrary, the
economic crisis was the culprit. Had the
pledgee been deceived as to the substance or
quality of the pledged shares of stock, he
would have had the right to claim another
thing In their place or to the immediate
payment of the obligation. This is not the case
here.
(1979)
The action will prosper. It is submitted that
the 400 heads of New Zealand cows were
pledged by DL to T & Co. in order to secure the
payment of the loan of P200,000.00. As an
adjunct of the accessory contract of pledge,
the parties also agreed that the cows shall be
kept at the ranch of T & Co. for pasture, that
the personnel of the latter shall take care of
them, and that for these services, the latter
shall be entitled to one-half of the offspring.
Unfortunately, they all died without the fault
of anybody. Now, what is the effect of the
loss? Since the loss was due to a fortuitous
event, it is clear that both the accessory
contract of pledge and the corollary contract
of services are totally extinguished. The
principal contract of loan, however, still
subsists. As a matter of fact, the obligation of
DL to pay the loan plus interest has become
immediately demandable.
(1996)
There is no pledge because only movable
property may be pledged (Art. 2094. NCC). If
at all, there was a pledge of the paper or
document constituting the Torrens Title, as a There is no contract of antichresis because no
movable by itself, but not of the land which right to the fruits of the property was given to
the title represents. There is no mortgage the creditor (Art. 2132 NCC).
because no deed or contract was executed in
the manner required by law for a mortgage A contract of simple loan was entered into
(Arts. 2085 to 2092, NCC; 2124 to 2131, NCC). with security arrangement agreed upon by
There is no contract of antichresis because no the parties which is not one of those
right to the fruits of the property was given to mentioned above.
the creditor (Art. 2132 NCC).
A contract of simple loan was entered into (2009)
with security arrangement agreed upon by a. The contract is valid because Rosario has to
the parties which is not one of those execute a document in favor of Jennifer to
mentioned above, transfer the ownership of the pledged ring to
the latter. The contract does not amount to
Alternative Answer: pactum commissorium because it does not
There is a contract of mortgage constituted provide for the automatic appropriation by
over the land. There is no particular form the pledgee of the thing pledged in case of
required for the validity of a mortgage of real default by the pledger.
property. It is not covered by the statute of
frauds in Art. 1403, NCC and even assuming B. No, my answer will be different. While the
that it is covered, the delivery of the title to contract of pledge is valid, the stipulation
the creditor has taken it out of the coverage authorizing the pledgee to immediately sell
thereof. A contract of mortgage of real the thing pledged is void under Art 2088 of the
property Is consensual and is binding on the New Civil Code, which provides that “the
parties despite absence of writing. However, creditor cannot appropriate the things given
third parties are not bound because of the by way of pledge or mortgage, or dispose of
absence of a written instrument evidencing them xxx.” Jennifer cannot immediately sell
the mortgage and, therefore the absence of by herself the thing pledged. It must be
registration. But this does not affect the foreclosed by selling it at a public auction in
validity of the mortgage between the parties accordance with the procedure under Art
(Art. 2125, NCC), The creditor may compel the 2112 of the New Civil Code.
debtor to execute the mortgage in a public
document in order to allow its registration
(Art. 1357.NCC in relation to Art. 1358. NCC).
(1984)
No. Under the agreement with A, B is
authorized to use the car. The creditor may
use the thing pledged with the consent of the
owner (Art. 2104). A period for the payment
of the obligation was also stipulated. Under
Article 1196, it is presumed that whenever a
period is designated, it is presumed to have
been established for the benefit of both the
creditors and the debtor. Hence, A cannot
prepay the loan and demand the return of the
pledged property until the term had arrived.
(2004)
The shares of stock cannot be deemed owned
by ABC upon default of MNO. They have to be
foreclosed. Under Article 2088 of the Civil
Code, the creditor cannot appropriate the
things given by way of pledge. And even if the
parties have stipulated that ABC becomes the
owner of the shares in case MNO defaults on
the loan, such stipulation is void for being a
pactum commissorium.
(1996)
None of the above. There is no pledge
because only movable property may be
pledged (Art. 2094. NCC). If at all, there was a
pledge of the paper or document constituting
the Torrens Title, as a movable by itself, but
not of the land which the title represents.
There is no mortgage because no deed or
contract was executed in the manner
required by law for a mortgage (Arts. 2085 to
2092, NCC; 2124 to 2131, NCC).
 QUASI CONTRACTS
(1989)
A. An implied contract requires consent of the
parties. A quasi-contract is not predicated on
consent, being a unilateral act.
B. The basis of an implied contract is the will
of the parties. The basis of a quasi-contract is
law to the end that there be no unjust
situation.
(1985)
) 1. B and C are solidarity liable for the losses.
They are so bound under the law on
negotiorum gestio and must comply with the
duties of a gestor in good faith.
2. B and C are only jointly liable because the
assumption of the negotiorum gestio was not
to avoid an imminent danger.
3. The law on negotiorum gestio which should
apply, renders an officious manager, who
delegates to another person all or some of his
duties, liable for the acts of the delegate. The
nature of their liability is solidary. (Art. 2146).
(1992)
a) The juridical relation is that of the quasi-
contract of "negotiorum gestio". Y
is the "gestor" or "officious manager" and X is
the "owner" (Art. 2144, Civil Code).
(b) Y must render an account of his operations
and deliver to X the price he received for the
sale of the harvested fish (Art, 2145, Civil
Code).
(c) X must pay the loan obtained by Y from W
because X must answer for obligations
contracted with third persons in the interest
of the owner (Art. 2150, Civil Code),
(d) Express ratification by X provides the
effects of an express agency and X is liable to
pay the commissions habitually received by
the gestor as manager (Art. 2149, Civil Code).
(1993)
No. B is not liable for damages, because he is
a gestor in negotiorum gestio (Art. 2144, Civil
Code)
Furthermore, B Is not liable to A because
Article 2147 of the Civil Code is not applicable.
B did not undertake risky operations which
the owner was not accustomed to embark
upon:
a) he has not preferred his own interest to
that of the owner;
b) he has not failed to return the property or
business after demand by the owner; and
c) he has not assumed the management in
bad faith. Alternative Answer; He would be
liable under Art. 2147 (1) of the Civil Code,
because he used the property for an
operation which the operator is not
accustomed to, and in so doing, he exposed
the house to increased risk, namely the
operation of a pension house on the second
floor and stores on the first floor.
(1995)
1. Negotiorum gestio existed between
Amparo and Armando, She voluntarily took
charge of the agency or management of the
business or property of her uncle without any
power from her uncle whose property was
neglected. She is called the gestor negotiorum
or officious manager, (Art. 2144, NCC)
2. It is recommended by the Committee that
an enumeration of any two (2) obligations and
two (2) rights as enumerated in Arts. 2145 to
2152, NCC, would entitle the examinee to full
credit.
Art. 2145. The officious manager shall
perform his duties with all the diligence of a
good father of a family, and pay the damages
which through his fault or negligence may be
suffered by the owner of the property or
business under management.
The courts may. however. Increase or
moderate the indemnity according to the
circumstances of each case.
Art. 2146. If the officious manager delegates
to another person all or some of his duties, he
shall be liable for the acts of the delegate,
without prejudice to the direct obligation of
the latter toward the owner of the business.
The responsibility of two or more officious
managers shall be solidary, unless
management was assumed to save the thing
or business from imminent danger.
Art. 2147. The officious manager shall be
liable for any fortuitous event:
(1) If he undertakes risky operations which the
owner was not accustomed to embark upon;
(2) If he has preferred his own interest to that
of the owner;
(3) If he fails to return the property or
business after demand by the owner, (4) If he
assumed the management in bad faith.
Art. 2148. Except when the management was
assumed to save the property or business
from imminent danger, the officious manager
shall be liable for fortuitous events
(1) If he is manifestly unfit to carry on the
management;
(2) If by his Intervention h e prevented a more
competent person from taking up the
management.
Art. 2149. The ratification of the management
by the owner of the business produces the
effects of an express agency, even if the
business may not have been successful.
Art. 2150, Although the officious
management may not have been expressly
ratified, the owner of the property or business
who enjoys the advantages of the same shall
be liable for obligations incurred in his
interest, and shall reimburse the officious
manager for the necessary and useful
expenses and for the damages which the who has no right to demand it (Art. 2154, Civil
latter may have suffered in the performance Code),
of his duties.
Negotiorum gestio refers to the juridical
The same obligation shall be incumbent upon relation which arises when a person
him when the management had for its voluntarily takes charge of the agency or
purpose the prevention of an imminent and management of the business or property of
manifest loss, although no benefit may have another, without any power from the latter,
been derived. as a consequence of which he is obliged to
continue the same until the termination of
Art. 2151. Even though the owner did not the affair and its incidents, or to require tile
derive any benefit and there has been no person concerned to substitute him, if the
imminent and manifest danger to the owner is in a position to do go (Art. 2144, Civil
property or business, the owner is liable as Code),
under the first paragraph of the preceding
article, provided: (2004)
(1) The officious manager has acted in good There was error in the amount of change
faith, and given by RRA. This is a case of solutio indebiti
(2) The property or business is Intact, ready to in that DPO received something that is not
be returned to the owner. Art. 2152. The due him. He has the obligation to return the
officious manager is personally liable for P100.00; otherwise, he will unjustly enrich
contracts which he has entered into with third himself at the expense of RRA. (Art. 2154, Civil
persons, even though he acted in the name of Code)
the owner, and there shall be no right of
action between the owner and third persons. (1992)
These provisions shall not apply: He would be liable under Art. 2147 (1),
because he used the property for an
(1) If the owner has expressly or tacitly ratified operation which the operator is not
the management, or accustomed to, and in so doing, he exposed
the house to increased risk, namely the
(2) When the contract refers to things operation of a pension house on the second
pertaining to the owner of the business, floor and stores on the first floor. (nasunog)
(NOTE: It is recommended by the Committee
that an enumeration of any two (2) (2004)
obligations and any two (2) rights as There was error in the amount of change
enumerated la Arts. 2145 to 2152, NCC would given by RRA. This is a case of solution indebiti
entitle the examinee to full credit.) in that DPO received something that is not
due him. He has the obligation to return the
(1976) P100.00; otherwise, he will unjustly enrich
Yes, he is bound to pay the reasonable value himself at the expense of RRA (Art. 2154).
thereof on the basis of quasi- contract.
Article 1474, provides that where the price
has not been fixed by the parties and the thing
or any part thereof has been delivered to an
appropriate buyer, he must pay a reasonable
price therefore. What is a reasonable price is
a question of fact dependent on the
circumstances of each particular case.
(2004) (1980)
(a) Yes, the Bank is entitled to recover the
$4,500 from "D". We have in this case an
example of a quasi-contract of solutio indebiti
which arises whenever a person unduly
delivers a thing through mistake to another
who has no right to demand it (Art 2154, Civil
Code). Its requisites are:
(1) There mast be a payment or delivery made
by one person to another; (2) The person who
made the payment or delivery was under no
obligation To do so; and
(3) The payment or delivery was made by
reason of mistake.
It is obvious that the above requisites are
present in the instant case.
(1997)
Solutio indebiti refers to the juridical relation
which arises whenever a person unduly
delivers a thing through mistake to another