FINAL EXAM IN CREDIT TRANSACTIONS (2008) Atty. Melissa Tan 1.

On 15 May 2005, A recovered a judgment against B for the sum of P140,000 with costs. Under this judgment, the sheriff levied on execution 3 carabaos found in the possession of X but were registered in the name of B. Y presented a third party claim, alleging that the carabaos had been mortgaged to him, and as evidence thereof presented a document dated 6 May 2005. The unregistered document upon which Y bases his cause of action reads as follows: I, B, do hereby state that I am indebted to Y in the sum of P77,000, and as a security to my creditor I hereby offer four heads of carabaos belonging to me exclusively (three females and one male), the certificates of registration of said animals being Nos. 2832851, 4670520, 4670521, and 4670522. I hereby promise to pay said debt in the coming month of February 2006, and in case I will not be able to pay, Y may dispose of the carabaos given as security for said debt. What is the nature of the contract? Who among the parties is entitled to the carabaos in question? (10 pts.) 2. A executed a chattel mortgage in favor of B over their house of strong materials located in Manila, which was being rented from J&C Co., to guaranty a loan worth P1.8M received from B. The contract specifically provides that the mortgagor voluntarily CEDES, SELLS, and TRANSFERS by way of chattel mortgage the property together with its leasehold rights over the lot on which it is constructed The mortgage was registered at the Registry of Deeds of Manila. When A defaulted in paying, the mortgage was extrajudicially foreclosed, and the house was sold at public auction pursuant to the said contract. As highest bidder, B was issued the corresponding certificate of sale. Thereafter, B commenced an ejectment case against A. A impugns the legality of the chattel mortgage, claiming that the subject matter of the mortgage is a house of strong materials and, being an immovable, it can only be a subject of a real estate mortgage and not a chattel mortgage. In addition, A claims that he only had a temporary right as lessee since the said house stood on rented land. Are the contentions of A tenable? (10 pts.) 3. A sold her right, title, and interest in the house and lot to B for P190,000. B paid P15,000 in advance, and executed a promissory note for the balance of P175,000. However, B could only pay P55,000 on account of the note, for which reason A obtained judgment for the unpaid balance. In the meantime, B was able to secure a clean certificate of title (No. 32526), and mortgaged the property to C to secure a loan of P300,000, said mortgage having been duly recorded. B defaulted on the mortgage loan in favor of C. C foreclosed the mortgage in her favor, obtained judgment, and upon its becoming final asked for execution. A filed a motion for recognition of her vendors lien in the amount of P120,000 plus legal interest, invoking Arts. 2242, 2243, and 2249 of the Civil Code. After hearing, the court ordered the lien annotated at the back of Certificate of Title No. 32526,

with the proviso that in case of sale under the foreclosure decree, the vendors lien and the mortgage credit of C should be paid pro rata from the proceeds. May A and C validly claim their pro rata share from the proceeds of the foreclosure sale by virtue of Arts. 2242, 2243, and 2249 of the Civil Code? (10 pts.) 4. a. Differentiate suspension of payment and insolvency. (5 pts.) b. In a chattel mortgage contract, is the creditor entitled to recover deficiency? Explain. (5 pts.) 5. SBC Corp. needed additional capital for its business and applied for various loans with Equitable PCI Bank (EPCIB) amounting to P5M. Spouses A and B acted as sureties for these loans and issued 3 promissory notes for this purpose. Under the terms of the notes, it was stipulated that EPCIB may consider SBC Corp. in default and may demand payment of the remaining balance of the loan upon SBCs insolvency or if it is declared to be in a state of suspension of payments. Subsequently, SBC filed with the SEC an application for rehabilitation and suspension of payments. The application was eventually granted. EPCIB then considered SBC in default and sought to collect payment from Spouses A and B by filing a collection case against them. The spouses filed a motion to dismiss citing Art. 2081 of the Civil Code which provides that they may set up against the creditor all the defenses which pertain to the principal debtor and are inherent in the debt; but not those which are purely personal to the debtor. The spouses aver that if SBC can set up the defense of suspension of payment of debts against EPCIB, then they should likewise be allowed to avail of such defense. Resolve. (10 pts.) 6. A pledged 100 shares of stock of Amsterdam Corp. in favor of B to secure an obligation of P75,000. A subsequently defaulted, prompting B to sell at a public auction the said shares of stock. In the public auction, the shares were sold at P90,000. However, it was discovered that after the pledge but before the auction sale, A had already sold the shares to C. a. Who acquires ownership of the shares? (5 pts.) b. After applying the proceeds of the obligation, there is an excess of P15,000. How is this excess applied? (5 pts.) 7. Define: a.) contingent claims; b.) refectionary credit; c.) usury; d.) irregular deposit; and, e.) subrogation. (2 pts. each) 8. Panchito bought a parcel of land from Marsha, which sale was recorded at the Office of the Register of Deeds. Prior to the sale, Marsha had already mortgaged the land to Chiquito. The mortgage was also registered. For Marshas failure to pay the mortgage debt, Chiquito foreclosed the mortgage and the land was sold to Dolphy as the highest bidder in the auction sale. Panchito, unaware of the previous transaction, sought to have the title registered in his name. Dolphy is opposing the application filed by Panchito. In whose name should the land be registered? (10 pts.) 9. Explain the application of Arts. 2241, 2242, 2244, 2249, and 2252 (on concurrence and preference of credits) with respect to the properties of the insolvent debtor. (10 pts.)

10. Joseph, who then needed money, approached Torio and borrowed P400,000, offering to place as security his residential house and lot located at Catbalogan, Samar. The parties thereafter executed a notarized deed of sale with right of repurchase wherein the purchase price of the house and lot, as indicated in the deed, was P400,000. Joseph thereafter turned over the tax declaration accompanied by BIR official receipts to Torio, who subsequently caused its cancellation and obtained a new one in his name. Thereafter, Torio started paying the realty taxes on the house and lot. However, Joseph continued to remain in possession of the property for the next 20 years. Meanwhile, Joseph entered into similar transactions as above involving the same house and lot with Makoy and Simon. On each of the two occasions, Joseph was given P400,000. Recently, when Joseph earned some money, he offered to pay back Torio the amount of P400,000. Torio refused, contending that he is already the owner of the property by virtue of the Deed of Sale. Joseph contends that the contract was one for a loan and that Torio must accept his repayment. Resolve. (10 pts.) 11. Differentiate equity of redemption and right of redemption. (5 pts. bonus)