I.

Distinctions
A. Guaranty vs. Suretyship
Ans.
A guaranty is a contract whereby a person called the guarantor binds
himself to the creditor to fulfil the obligation of the principal debtor in case the
latter should fail to do so. While suretyship, is contract whereby one person
engages to be answerable to a third person, for the debt, default or
miscarriage of the principal or obligor. Moreover, under the contract of
guaranty, the guarantor enjoys the benefit of excussion, however, in
suretyship, the surety does not enjoy the benefit of excussion.

B. Chattel vs. REM

Ans.
Chattel Mortgage is contract by virtue of which personal property is
recorded in the Chattel Mortgage Registry as security for the performance of
an obligation. While REM, is contract whereby the debtor secures to the
creditor the fulfilment of a principal obligation, specially subjecting to such
security immovable property in the case the principal obligation is not
complied with at the time stipulated.

C. Chattel vs Pedge
Ans.
In chattel mortgage, delivery of the personal property to the mortgagee is
not necessary. While in pledge, delivery of the personal property is necessary.
With respect to their registration, in chattel mortgage, the registration of the
mortgage in the Chattel Mortage Registry is required by law. While in pledge,
registration in the registry of property is not required.

D. Pledge vs REM
Ans.
In pledge, the subject matter is movable property. While in REM, the
subject matter is immovable property. Moreover, in pledge, delivery of the
movable property is necessary for its perfection. While in REM, delivery is not
necessary. In addition, the pledgor can sell the thing pledged only with the
consent of the pledgee. While the mortgagor may sell the property even
without the consent of the mortgagee.

E. Antichresis vs. Pledge

Ans.
As to the subject matter, antichresis refers to real property, while pledge
refers to personal property. With respect to its perfection, in antichresis, it is
perfected by mere consent, while in pledge, it is perfected by the delivery of
the thing pledged. However, the similarity of the two (2) is that the debtor
loses control over the subject matter.

F. Antichresis vs. REM

Ans.
As to delivery, in antichresis, real property is delivered to the creditor in
order to receive the fruits thereof, while in REM, debtor usually retains
possession of the Real property. Moreover, in Antichresis, the creditor acquires
only the right to receive the fruits of the property, hence, it does not produce
real right, while in REM, there is no right acquired to receive the fruits, but the
mortgage creates a real right over the property.
II. Definition/Discussion

A. Continuing Guaranty
It is one which is not limited to a single transaction but which contemplates a
future course of dealings, covering a series of transactions generally for an
indefinite time or until revoked. It covers all transactions, including those arising in
the future, which are within the description or contemplation of the contract of
guaranty, until the expiration or termination thereof.

B. Benefit of division
The benefit of division takes place when there are two or more guarantors of the
same debtor and for the same debt. The obligation shall be divided among all
the guarantors. This can also be asserted when only one guarantor has paid the
whole obligation. He has the right to be indemnified by the other guarantors
according to their proportionate shares.

C. Benefit of excussion
Under the NCC, which provides that, “The guarantor cannot be compelled to
pay the creditor unless the latter has exhausted all the property of the debtor,
and has resorted to all the legal remedies against the debtor..”

D. Right of indemnity
It is the right of the guarantor or surety to demand for reimbursement from the
principal debtor the amount aid for the fulfilment of the principal obligation. It
includes the total amount of the debt, legal interest, expenses incurred by the
guarantor and damages if there is any.

E. Right of subrogation
In one case, subrogation has been defined as the transfer of all the rights of the
creditor to a third person or the guarantor, who substitutes him in all his rights. It
may also be defined such that one party has the right to "step into the shoes" of
another party for the purpose of bringing a claim for damages.

F. Pactum Commisorium
It is a stipulation in which upon the default of the debtor, the creditor shall
become the owner of the mortgaged property. It is also known as the automatic
appropriation of mortgaged property by the creditor. Such stipulation is null and
void.

G. Doctrine of mortgagee in good faith

It is a rule which provides that buyers or mortgagees dealing with property
covered by a Torrens Certificate of Title are not required to go beyond what
appears on the face of the title. However, it has been consistently held that this
rule does not apply to banks, which are required to observe a higher standard of
diligence.

H. Free disposal
“Free disposal of the property” means that the property must not be subject to
any claim of a third person or that the thing is free from encumbrances or liens.

I. “Capacity to dispose of property”

Means that the pledgor or mortgagor has the capacity or the authority to make
a disposition of the property.

J. Dragnet Clause
It is a stipulation that the mortgage shall include future advancements made by
the debtor in relation to the mortgage for the purpose of convenience and to
avoid additional expenses for the execution of a new security.
K. Indivisibility of pledge and mortgage
A pledge or mortgage is one and indivisible as to the contracting parties and the
rule applies even if the obligation is joint and not solidary. Generally, the divisibility
 of the principal obligation is not affected by the indivisibility of the pledge or
mortgage. The following are the exceptions:
1. Where each one of the several things guarantees a determinate portion of
the credit;
2. Where only a portion of the loan was released;
3. Where there is a failure of consideration; and
4. Where there is no debtor-credit relationship

L. Right of redemption
The right of the mortgagor in case of extrajudicial foreclosure to redeem the
mortgaged property within the period of 1 year from the date of the registration
the certificate of sale with the registry of deeds.

M. Equity of redemption
The right of the mortgagor in case of judicial foreclosure to redeem the
mortgaged property after his default in the performance of the conditions of the
mortgage but before the confirmation of the sale of the mortgaged property.
Redemption of the property must be within the period of not less than 90 days but
not more than 120 days from the entry of judgement of foreclosure or even after
the foreclosure of the sale but before the judicial confirmation of the sale.

N. Affidavit of good faith

It is an oath in the chattel mortgage contract wherein it is stated that the
chattel mortgage has been constituted to secure a principal obligation and not
meant for fraud or any ill purpose.

O. Concurrence of credit
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.

P. Preference of credit
The right held by a creditor to be preferred in the payment of his claim above
others to be paid first out of the debtor’s assets.