Final Exam in Credit Transactions

Merlyn M. Casibang, Jr.
JD-II
Final Exam in Credit Transactions
June 18, 2021
1. Pactum Commissorium in a deed of mortgage is null and void is provided in Article 2088 of
the New Civil Code of the Philippines which states that “the creditor cannot appropriate the
things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is
null and void.” The following are the elements of a pactum commissorium: “(1) that there should
be a pledge or mortgage wherein a property is pledged or mortgaged by way of security for the
payment of the principal obligation; (2) that there should be a stipulation for an automatic
appropriation by the creditor of the thing pledged or mortgaged in the event of non-payment of
the principal obligation within the stipulated period.” Such stipulation is null and void because it
is contrary to good morals and public policy.
2. In a guaranty, the guarantor is subsidiary liable while in suretyship, the surety is primarily
liable. In guaranty, the guarantor pays if the debtor cannot pay, while in suretyship, the surety
pays if the debtor does not. In guaranty, the guarantor is the insurer of the debtor’s solvency
while in suretyship, the surety is the insurer of the debt. In guaranty, the guarantor pays only if
the principal debtor is unable to pay while in suretyship, the surety is responsible for the debt's
payment at once if the principal debtor makes default
The right of excussion can be exercised by the guarantor when after legal remedies
against the principal debtor have been expanded. Thus, it was held that the creditor must be
first obtain a judgment against the principal debtor before assuming to run after the alleged
guarantor, “for obviously the ‘exhaustion of the principal’s property’ cannot even begin to take
place before judgment has been obtained”. The law imposes conditions precedent for the
invocation of the defense. Thus, in order that the guarantor may make use of the benefit of
excussion, he must set it up against the creditor upon the latter’s demand for payment and point
out to the creditor available property of the debtor within the Philippines sufficient to cover the
amount of the debt as enunciated in Article 2060 of the New Civil Code of the Philippines.
3. The differences between commodatum and mutuum are the following. Commodatum
ordinarily involves something not consumable, while in mutuum, the subject matter is money or
another consumable thing. In commodatum, ownership of the thing loaned is retained by the
lender while in mutuum, the ownership is transferred to the borrower. Commodatum is
essentially gratuitous, while mutuum may be gratuitous or it may be onerous, that is, with
stipulation to pay interest. In commodatum, the borrower must return the same thing loaned,
while in mutuum, the borrower need only pay the same amount of the same kind and quality.
Commodatum may involve real or personal property, while mutuum refers only to personal
property. Commodatum is a loan for use or temporary possession, while mutuum is a loan for
consumption. In commodatum, the bailor may demand the return of the thing loaned before the
expiration of the term in case of urgent need, while in mutuum, the lender may not demand its
return before the lapse of the term agreed upon. In commodatum, the loss of the subject matter
is suffered by the bailor since he is the owner, while in mutuum, the borrower suffers the loss
even if caused exclusively by a fortuitous event and he is not, therefore, discharged from his
duty to pay. It may also be said that while commodatum is purely personal in character, mutuum
is not so.
4.1. a. Pledge is a contract by virtue of which the debtor delivers to the creditor or to a
third person a movable, or document evidencing incorporeal rights, 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.
b. Chattel Mortgage is an accessory contract by virtue of which personal property is

recorded in the Chattel Mortgage Register as a security for the performance of an obligation.
c. Real Estate Mortgage is a contract in which the debtor guarantees to the creditor the
fulfillment of a principal obligation, subjecting for the faithful compliance therewith a real property
in case of non-fulfillment of said obligation at the time stipulated.
4.2. a. An example of the contract of pledge is pawning property for cash. For example, A
borrowed P500 from B, a jewelry shop owner. B decides first that A will have to pledge his ring
as security that he will repay the debt by a specific time. In law A is called the pledgor, and B the
pledgee. The ring is referred to as pledged property. As in any common pledge contract,
possession of the pledged property is transferred to the pledgee. At the same time, however,
ownership (or title) of the pledged property remains with the pledgor. A gives the ring to B, but
he still legally owns it. If A repays the debt under the contractual agreement, B must return the
ring. But if he fails to pay, he can sell it to satisfy his debt.
b. An example of the contract of chattel mortgage is when A obtained a loan
of P1,000,000 from B, a bank, payable within one year. To secure payment, A executed a
chattel mortgage on a Toyota Avanza.
c. An example of the contract of real estate mortgage is when A obtained a loan
of P1,000,000 from B, a lending institution, payable within one year. To secure payment, A
executed a real estate mortgage on a 200-square meter piece of property.
5. The mortgage which was registered will be preferred because as stated in Article 2125 of the
New Civil Code of the Philippines, in order that a mortgage may be validly constituted, the
document in which it appears be recorded in the Registry of Property. Therefore, between the
equitable mortgage and the second mortgage which was registered, the second mortgage will
be preferred.

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Merlyn M. Casibang, Jr.

b. Chattel Mortgage is an accessory contract by virtue of which personal property is

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