COVERAGE: A. Contract of Pledge, Re GPA REVIEW SCHOOL OF THE PHILIPPINES REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS | Mortgage, Chattel Mortgage, Other Credit Transactions and Agenoy Direction: Read and select the best answer for the following questions. 7 The following requisites are essential to the contracts of pledge, real estate mortgage and chattel mortgage, except , That they be constituted to secure the fulfillment of a principal obligation such as contract of loan. ', That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged. ©. That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose. 4. That when the principal obligation becomes dut, the things in which the pledge or mortgage consists may be alienated for the payment of the creditor. €. That the thing pledged or mortgaged be placed in the possession of the creditor, or of a third person by common agreement. The following are the kinds of principal obligations that may be secured by a contracts of pledge, of real estate ‘mortgage or of chattel mortgage, except Pure obligations Conditional obligations whether suspensive condition or resolutory condition Obligations with a period whether suspensive period (ex die) or resolutory period ‘Natural obligations Rescissible obligations Voidable obligations Unenforceable obligations ‘Null and void obligations diem) PRoeaoge ‘When is the pledgor or mortgagor required to be the owner of the thing pledged or mortgaged for the validity of contracts of pledge, of real estate mortgage or of chattel mortgage? .._ At the time the principal obligation is constituted, b, At the time the contract of pledge or mortgage is constituted or perfected. ©. Atthe time of the failure to pay the principal obligation. 4. At the time the thing to be pledged or mortgaged is to be delivered. D borrowed P1,000,000 from C. G, a third person, mortgaged his land to secure the fulfillment of D’s loan. Is the contract of mortgage valid? a. No because D must be the owner of the mortgaged land. b.. Yes provided G will deliver the land to C. . Yes because third persons who are not parties to the principal obligation may secure the latter by pledging, or mortgaging their own property. d. No because G is no privy to the contract of loan. D borrowed P20,000 from C. To secure the fulfillment of the loan, D mortgaged a land owned by his ailing father. Which of the following statements is correct? a. The contract of mortgage is valid because future property may be pledged or mortgaged. b. The contract of loan is null and void because the contract of mortgage is null and void. , The contract of mortgage will become valid upon the death of D's father. 4, The contract of mortgage is null and void because the mortgagor must be the owner of the property ‘mortgaged at the time it is constituted but the contract of loan remains to be valid. ABC Inc. borrowed P2,000,000 from BPI. ABC Inc. is under receivership. To secure the fulfillment of the loan, ABC mortgaged its administrative building. Which of the following statements is correct? a. The contract of mortgage is null and void because the mortgagor has no free disposal of the thing. b. The contract of mortgage is valid because the mortgagor is the absolute owner of the property mortgaged at the time the mortgage is constituted, ©. The contract of mortgage is null and void because only natural person may enter in @ contract of mortgage, d. The contract of mortgage is voidable. Itis a stipulation whereby the thing pledged or mortgaged shall automatically become the property of the creditor in the event of non-payment of the debt within the term fixed, a. Pactum creditarium b. Pactum commissoriun ©. Pactum debitarium 4. Pactum crematorium CPAR— Regulatory Framework for Business Transactions RFBT 8708 Page 1 of 208. D borrowed P10,000 from C. To seoure the fulfillment of the loan, D pledged his laptop. The contract of pledge provides that the creditor-pledgee may automatically appropriate the laptop upon failure of the debtor-pledgor to pay the loan. On the date of maturity of the loan, D failed to pay the loan. Which of the following statements is correct? 1a, C becomes the owner of the laptop. The laptop cannot be alienated for the payment of the loan. c. C does not become the automatic owner of the laptop upon D’s failure to pay the loan because that provision is considered pactum commissorium which is contrary to law and public policy. 4. The contract of pledge is null and void because of pactum commissorium provision. 9. D borrowed P10,000 from C. To secure the fulfillment of the loan, D pledged his laptop. On the date of maturity of the loan, D failed to pay the loan. As a result, D and C agreed that the pledged laptop shall be owned by C in full satisfaction of the secured contract of loan, Which of the following statements is correct? ‘a. C becomes the owner of the laptop by reason of dacion en pago which is governed by Law on Sales. b. The laptop cannot be alienated for the payment of the loan. ‘c. C does not become the automatic owner of the laptop upon D's failure to pay the loan because their subsequent agreement is considered pactum commissorium which is contrary to law and public policy. 4. Their subsequent agreement for the payment of the loan shall be governed by law on obligation because that is a novation. 10. The following are the instances where the thing pledged or mortgaged may be sold or alienated to pay the principal obligation, except a. If the pledgor or mortgagor fails to fulfill certain conditions and such violation would make the debt due and demandable. b. If the debtor has lost the right to make use of the period or where there is an acceleration clause in the payment of installment. ¢. Upon default to pay the obligation at maturity. d. Before maturity of the principal obligation. 11. What is the nature of a contract of pledge, of chattel mortgage, of real estate mortgage or of antichresis? a, Itis divisible if the principal contract is joint. b. Itis indivisible if the principal contract is solidary. . Itis divisible whether the principal contract is joint or solidary. a. ible whether the principal contract is joint or solidary. 12. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value respectively. After several days, D pays P4,000 to C. Which of the following statements is correct? ‘a. The contract of pledge is extinguished. 'b. The contract of loan is exting ed. c. D cannot demand the release of his ring because a contract of pledge is indivisible. d. Dmay compel C to return the ring because P4,000 of the loan is already paid. 13. D borrowed from C P100,000 secured by a mortgage on D’s two lots (lot 1 and lot 2). D dies leaving E and F as heirs with E inheriting lot 1 and F lot 2. F pays P50,000 of the loan. Which of the following statements is correct? a, F may ask for the extinguishment of the mortgage on lot 2. b. The contract of mortgage is extinguished. c. The contract of loan is extinguished. d. F cannot ask for the extinguishment of the mortgage on lot 2. 14, Using the same data in preceding number, suppose it is C who dies leaving X and Y as heirs. If D pays X 50,000, which of the following statements is correct? ‘a. X may cancel the mortgage to the prejudice of Y. b. X cannot cancel the mortgage to the prejudice of Y. c. The contract of mortgage is extinguished. 4. The contract of loan is extinguished. 15. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value respectively. They agreed that the ring will secure P4,000 of the loan and the watch will secure the balance of the loan. After several days, D pays P4,000 to C. Which of the following statements is correct? 8, The contract of pledge on the watch is extinguished. b. The contract of loan is fully extinguished, c. D cannot demand the release of his ring because a contract of pledge is indivisible. d. D may compel C to return the ring because contract of pledge on the ring is extinguished. ee erTT CRA ~ Regulatory Framework for Business Transactions RFBT 8706 Page 2 of 20 hh _16, A and B jointly borrowed P10,000 from C. In order to secure their respective obligations, A pledged his cellphone while B pledged his laptop. At the maturity date of the loan, A paid P5,000 of the loan. Which of the following statements is correct? ‘a, The contract of pledge on the cellphone is extinguished. b. The obligation of B is extinguished. ©. A-cannot demand the release of his cellphone because a contract of pledge is indivisible. 4. The contract of pledge on the laptop is extinguished. 17. A and B jointly borrowed P10,000 from C. In order to secure the obligation, A pledged his cellphone while B pledged his laptop. At the maturity date of the loan, A paid PS,000 of the loan. Which of the following statements is correct? a. The contract of pledge on the cellphone is extinguished, b. The obligation of B is extinguished. ©. A cannot demand the release of his cellphone because a contract of pledge is indivisible. 4. The contract of pledge on the laptop is extinguished. 18, Itis a contract by virtue of which the debtor delivers to the creditor or to a third person a movable, or instrument 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 retumed with all its fruits and accessions. . a. Contract of Pledge b. Contract of Chattel mortgage ©. Contract of Real estate mortgage 4. Contract of Antichresis 19, In case the cause or consideration of the contract of pledge is not stipulated, what is the cause or consideration of a contract of pledge? a. Ithas no cause or consideration, b. The cause or consideration of the principal obligation or contract of loan. c. The cause or consideration is the liberality of the pledgor. 4. The cause is the service remenerated 20. The following are the characteristics of a contract of pledge, except a. Consensual ~ It is perfected by mere consent. 'b. Accessory — It has no independent existence of its own because there must be contract of loan. ©. Unilaterial - It creates an obligation on the part of the creditor to return the thing upon the fulfillment of the principal obligation. 4. Subsidiary ~ The obligation incurred does not arise until the fulfillment of the principal obligation which is secured. 21. The following are the essential requisites of conventional pledge or contract of pledge, except a. That it be constituted to secure the fulfillment of a principal obligation or contract of Joan. b. That the pledgor be the absolute owner of the thing pledged. ¢. That person constituting the pledge has the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. 4. That the thing pledged be placed in the possession of the creditor, or a third person by common agreement or there must be delivery of the thing pledged. . That the contract of pledge be constituted in public document, 22. What is the nature of a contract to constitute a pledge? a. Consensual contract b. Real contract, ©. Formal contract 4. Solemn contract 23, What is the legal effect of a promise or contract to coustitute a pledge? a. It is perfected by delivery of the thing pledge, . It is perfected through the notarization of the promise. ©. It is perfected by mere consent and gives rise only to a personal action between the contracting parties. 4. It gives rise to a real action over the thing pledged, 24. The following statements pertaining to a promise to constitute a pledge or mortgage are correct, except a, It gives rise only to a personal action between the contracting parties, b. The contract perfected is a real contract, ©, Itereates no real right in the property but only a right to compel the fulfillment of the promise but there is ‘no contract of pledge or contract of mortgage Yel. ; 4, The promissor will be criminally liable if he mortgages or pledges as unencumbered things which he knew were subject to some burden. nr CRAR— Regulatory Framework for Business Transactions © RFBT 8706 Page 3 of 2025, What is the nature of a contract of pledge? a. Consensual contract b. Real contract ©. Formal contract 4. Solemn contract 26. The following may become the object of a contract of pledge, except a. All movable b. Personal property susceptible of possession. ©. Incorporeal rights which are evidenced by negotiable instruments, bill of lading, shares of stocks, bonds, ‘Warehouse receipts and similar documents. 4. Real or immovable properties and rights thereon, 27. What is the form of contract of pledge to bind the contracting parties? a. It must be in a private instrument. b. Itmust be in a public instrument. c. It must be registered in the registry of deeds. 4. Itmay be in any form because itis a real contract. 28. What is the form of éontract of pledge to bind or to affect third persons? a. It must be registered in the chattel mortgage registry. b. Itmust be registered in the registry of deeds. ‘c. Itmust be in a public instrument showing a description of the thing pledged and the date of the pledge. , Itmust be recorded in the Intellectual Property Office. 29. The contract of pledge shall cover the following, except a. The thing pledged. b. The fruits, income, dividends or interests earned or produced by the thing pledged, unless there is stipulation excluding them. ¢. The offspring, when the thing pledged is an animal, unless there is a stipulation excluding them. 4. The future inheritance of the pledgor. 30, The following are the rights of the debtor-pledgor, except a. To alienate, with the consent of the pledgee, the thing pledged. b. To continue to be the owner of the thing pledged unless it is expropriated. c. To become the owner of the offspring of the animal pledged if there is no stipulation to the contrary but such offspring shall be subject to the pledge. 4d. To ask for the return of the thing pledged after he has paid the debt and its interest, with expenses in a proper case. e. To ask that the thing pledged be judicially or extra-judicially deposited if it is used without authority or for a purposes other than for its preservation. f. To require that the thing be deposited with a third person if it is in danger of being lost or impaired through the negligence or willful act of the pledgee. To demand the return of the thing pledged, upon offering another thing in pledge, provided the latter is of the same kind and quality, if there are reasonable grounds to fear the destruction or impairment of the thing pledged without the fault of the pledgee. This right is without prejudice to the right of the pledgee to have the thing sold at a public sale. h, To demand the return of the thing pledged despite defaulting on the payment of the secured principal obligation, 31. In case the thing pledged is alienated by the debtor-pledgor to third person, what is the effect of the consent of the pledge to the alienation made by the pledgor ofthe thing pledged to third person? a. The thing pledged remains to be owned by the debtor-pledgor b. The ownership of the thing pledged is transmitted to the buyer. c. The creditor-pledgee loses possession of the thing pledged. 4, The contract of pledge is already extinguished, 32. What is the remedy of the pledgor-debtor if the pledgee-creditor use the thing pledged, without the authority of the owner or should misuse the thing in any other way? a, To ask that it be judicially or extra-judicially deposited b, To ask for the return of the thing pledged. iguishment of the contract of pledge 4. To ask for the extinguishment of the contract of loan, rr CRAR— Regulatory Framework for Business Transactions REBT 8706 Page 4 of 20eile 33. What is the remedy of the pledgor-owner if the thing pledged is in danger of being lost or impaired through the negligent or willful act of the pledgee? a, To require that it be deposited with a third person. b, To ask for the return of the thing pledged. ©. Toask for the extinguishment of the contract of pledge. 4, To ask for the extinguishment of the contract of loan, 34, What is the remedy of the pledgor-owner if there are reasonable grounds to fear the destruction or impairment of the thing pledged, without the fault ofthe pledgee? 4. Tovask for the retum of the thing, upon offering another thing in pledge, provided the latter is of the same kind as the former and not of inferior quality but subject to the right of the pledgeo to sell the said pledged item in public auction, b. To require that it be deposited with a third person, €. Toask for the extinguishment of the contract of pledge. 4. Toask for the extinguishment of the contract of loan. 435. If there are reasonable grounds to fear the destruction or impairment of the thing pledged, without the fault of the pledgee, which is correct? a. The pledgor-owner may ask for the return of the thing, upon offering another thing in pledged, provided the latter is of the same kind as the former and not of inferior quality even it is already sold in public auction by the pledgee-creditor. b. The pledgee-creditor may cause the sale of the thing pledged at a public sale and the proceeds of the auction shall be a security for the principal obligation in the same manner as the thing originally pledged. However, the pledgee is bound to advise the pledgor, without delay, of any danger to the thing pledged. ¢. The right of the pledgor-owner is superior to the right of the pledgee-creditor. 4. The contract of pledge is extinguished by the sale of the thing pledged in the public auction. | 36. The following are the obligations of the debtor-pledgor, except a. To pay the debt and its interest, with expenses, in a property case, when they are due. b. To pay damages that the pledgee may suffer by reason of the flaws of the thing pledged, if he was aware of such flaws but he did not advise the pledgee of the same. i ©. To pay for the expenses which are necessary for the preservation of the thing pledged. | 4. To warrant the thing pledged for its quality and merchantability. 37. The following are the rights of the creditor-pledgee, except a. To retain in his possession the thing pledged until the debt is paid b. To demand reimbursement of the expenses made for the preservation of the thing pledged. ¢. To bring actions which pertain to the owner of the thing pledged in order to recover it from, or defend it against third person. 4. To use the thing pledged if he is authorized to do so, or when its use is necessary of the preservation of the thing. ©. To cause the sale of the thing pledged at a public sale, if there is a danger of destruction, impairment or diminution of value of the thing pledged without his fault. The pledgee is bound to advise the pledgor, without delay, of any danger to the thing pledged. £, To collect and receive the amount due if the thing pledged is a credit which becomes due before it is redeemed, and to apply the same to the payment of his claim. & If the pledge earns or produces fruits, income, dividends, or interests, the creditor shall compensate what he receives with those which are owing him; but if none are owing him, or insofar as the amount may exceed that which is due, he shall apply it to the principal, Unless there is a stipulation to the contrary, the pledge shall extend to the interest and earnings of the right pledged. To sell the thing pledged upon default of the debtor. To appropriate the thing pledged in case the thing pledged is not sold in first and second public auctions. To become the automatic owner the thing pledged upon first default of debtor to pay the principal obligation at maturity date 38. The following are the obligations of creditor-pledgee, except a. To take care of the thing pledged with the diligence of a good father of a family b. To be liable for the loss or deterioration of the thing pledged unless itis due to a fortuitous event. . To be responsible for the acts of his agents ot employees with respect to the thing pledged. 4. Not to use the thing pledged except when he is authorized by the owner or when the use of the thing is necessary for its preservation. €. To deliver to the debtor the surplus after paying his claim from what he has collected on a credit that was pledged and which has become due before it is redeemed f. To deposit the thing pledged with a third person even not authorized by the court. < CRAR— Regulatory Framework for Business Transactions RFBT 8706 Page S of 2039. The following are the rights of a third person who pledges his own movable property to secure debt of another, except a, Tobe indemnified by the debtor if he pays the creditor. b. To be subrogated to all the rights of the creditor against the debtor if he pays the creditor. c. Tobe released from liability in the cases provided by law. 4. To become principally liable. 40, Grace obtained a loan from Jojo in the amount of PIM with Mar serving as guarantor. Rody pledged his cellphone to secure the debt of Grace. If Rody pays the PIM loan of Grace, which is correct? There will be no legal subrogation if Grace does not consent to the payment of Rody. Rody cannot collect the PIM from Grace ifthe latter does not consent to the payment of Rody. Rody can collect the PIM from Mar if Grace will not be able to pay Rody. Mar is not liable to Rody. pose 41. A third person who pledges his own movable property to secure the debt of another shall be released from liability in the following cases and may ask for the return of the thing pledge from the pledge, except a. If the creditor voluntarily accepts immovable or other property in payment of the debt even if the creditor thereafter loses the same by eviction. b. [fan extension of time is granted to the debtor by the creditor without pledgor’s consent. c. If through some act of the creditor, the pledgor cannot be subrogated to the rights, mortgages and preferences of the creditor. 4. If the thing pledged is deteriorated on the fault of the pledge. ©. If the debtor defaults in the payment of principal obligation on the maturity date. 42. If two or more things are pledged, who has the right to choose which thing will be sold in the absence of stipulation? a. Pledgor b. Pledgee c. Debtor d. Government 43, Pledge may be extinguished directly or indirectly. The following are the modes of extinguishing the contract of pledge directly, except ‘When the principal obligation secured by the pledged is extinguished. Return by the pledgee of the thing pledged to the pledgor or owner. ‘Renunciation or abandonment in writing by the pledgee of the pledge. Sale of the thing pledged regardless of the net proceeds. ‘Appropriation of the thing pledged by the pledgee if the thing pledged is not sold in the first and second auctions. epoge £ Which of the following direct modes of extinguishing contract of pledge impliedly extinguish the principal obligation or contract of loan? ‘Retum by the pledgee of the thing pledged to the pledgor or owner. Renunciation or abandonment in writing by the pledgee of the contract of pledge. Sale of the thing pledged in public auction in case of default by debtor regardless of the amount of the net proceeds of sale. ‘Appropriation of the thing pledged by the pledge in case the thing pledged is not sold in the first and second public auctions. a Tand b. UlandIv ©. Land I 4. DandIV 2 BRE 45. Which of the following direct modes of extinguishing contract of pledge do not impliedly extinguish the principal obligation or contract of loan? Return by the pledgee of the thing pledged to the pledgor or owner. Renunciation or abandonment in writing by the pledge of the contract of pledge. Sale of the thing pledged in public auction in case of default by debtor regardless of the amount of the net proceeds of sale. ‘Appropriation of the thing pledged by the pledgee in case the thing pledged is not sold in the first and second public auctions. a. Tand Il b. Wand IV ©. Vand iit 4. MandIV 3 BR a Tact e CbAR— Regulatory Framework for Business Transactions RFBT 8706 Page 6 of 2046, Which of the following stipulations in a contract of pledge is null and vold? L a. UL A stipulation which provides that the contract of pledge is not extinguished by the return of the thing pledged. A stipulation allowing the appropriation by the pledgee of the thing pledged in case the same is not sold in the first and second auctions, A stipulation for the recovery of det the amount of the obligation. a. Land Ill b. Mand Ml c. Land I 4. 1, Mand I iency in case the proceeds from the sale of the thing pledged is less than 47. If the thing is found in the possession of the pledgor or owner or ifthe thing is in the possession of a third person ‘Who has received it from the pledgor or owner, which of the following is incorrect? ‘a. There is prima facie presumption that the contract of pledge is extinguished. b. There is prima facie presumption that pledge returned the thing pledged. ©. There is prima facie presumption that the contact of loan is extinguished. 48, Which of the following statements is incorrect in case the pledge renounces or abandons in writing the contract of pledge? a. The contract of pledge is extinguished but the contract of loan remains. b, The acceptance by the pledgor is not necessary for extinguishing contract of pledge. ©. The pledgee becomes a depositary upon renunciation if in the meantime, the thing pledged is not yet returned to the owner. 4d. The return of the thing pledged is necessary for extinguishing the contract of pledge for this mode of contract of pledge extinguishment. 49. The following are the formalities required for the sale of the thing pledged in case of failure of the debtor to pay the principal obligation, except a, It must be by public auction, b. Itmust be through a notary public. ©. There must be a notice to the debtor and the owner of the thing pledged, stating the amount for which the public sale is to be held. 4. The thing pledged must be sold by the pledge at the first auction only. 50. Sale of pledged personal property in ie ne shall be made in Public auction or sale only Private auction or sale only Generally public auction or sale unless there is agreement for private auction or sale Generally private auction or sale unless there is agreement for public auction or sale peop 51. The following persons may bid at the public auction, except a. The pledgor or owner b. The pledgee if there are other bidders ©. Third persons d. The pledgee even if he is the only bidder ‘52, In case the bids of the pledgor-owner, the pledgee and a third person are equal and considered the highest bid, who shall be preferred among them? a. Pledgee b. Pledgor-owner cc. Third person 53. What is the effect of sale at public auction of the thing pledged? a. It does not extinguish the contract of pledge, b. The contract of pledge and principal/contract of loan obligation shall be extinguished if the proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a proper case. ©. The contract of pledge and principal obligation/contract of loan shall be extinguished if the proceeds of the sale exceed the amount of the principal obligation, interest and expenses in a proper case. 4. The contract of pledge and principal obligition/contract of loan shall be extinguished whether or not the proceeds of the sale are equal to the amount of the principal obligation, interest and expenses in a proper case. 54, If the proceeds of the sale of the thing pledged in conventional pledge is more than the amount of the obligation, which of the following statements is true? 8. The debtor-pledgor shall be entitled to the excess unless there is an agreement to the contrary. b. The creditor-pledgee shall always be entitled to the exces ©. The creditor-pledgee shall be entitled to the excess unless there is an agreement to the contrary. 4. The debtor-pledgor shall always be entitled to the excess. CRAR - Regulatory Framework for Business Transactions | RFBT 8706 Page 7 of 2055, Ifthe proceeds of the sale of the thing pledged in conventional pledge is less than the amount of the obligation, which of the following statements is true? a. The debtor-pledgor shall always pay for the deficiency. b. The creditor-pledgee cannot recover the deficiency even if stipulated. c. The creditor-pledgee can recover deficiency only if stipulated. 4. The debtor-pledgor shall pay for the deficiency if stipulated. 56. If the thing pledged is not sold in the first and second public auctions, which of the following statements is incorrect in case of appropriation by the pledgee of the thing pledged? ‘a. Thecreditormay appropriate the thing pledged validly. b. The contract of pledge is extinguished if the creditor decided to appropriate the thing pledged. ¢. The principal obligation/contract of loan is not extinguished if the creditor decided to appropriate the thing pledged. 57. DLSU pledged its notes receivable from a parent to a factor on January 1, 2016 with remaining term of 30 days or maturity date of January 31, 2016. The face value of the notes receivable is P1,000,000 with maturity value of 1,200,000. The notes receivable is pledged for a note payable of P1,100,000 inclusive of interest. If the factor- pledge collects the P1,200,000 from the parent on January 31, 2016, who shall be entitled for the excess of 100,000? DLSU, the pledgor-debtor Parent Factor, the pledgee-creditor None of the above eeose 58. It isa type of pledge which refers to the right of a person to retain a thing until he receives payment of his c a. Conventional pledge b. Voluntary pledge ©. Agreed pledge d. Legal pledge or pledge by operation of law 59. The following are examples of legal pledge, except 8. A possessor in good faith may retain the movable upon which he has incurred necessary and useful ‘expenses until he has been reimbursed therefore. b. He who has executed work upon movable has a right to retain it by way of pledge until he is paid. c. The depositary may retain the thing deposited until the full payment of what may have been due from him by reason of the deposit. 4. A contract by virtue of which the debtor delivers to the creditor or to a third person a movable, or instrument 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. 60, The provisions on conventional pledge on the possession, care and sale of the thing as well as on the termination of the pledge shall be applicable to legal pledge except with respect to the sale of the thing as follows. The following are the rules applicable to legal pledge on the sale of the thing pledged, except a. The thing may be sold only after demand of the amount for which the thing is retained. b. The public auction shall take place within one month after such demand. ¢. If without just grounds, the creditor does not cause the public sale to be held within such period, the debtor may require the return of the thing. 4d, In case there is deficiency from the public sale, the pledgee-creditor may still recover the deficiency even ifnot stipulated ¢. After payment of debt and expenses, the remainder of the price of sale shall be retained by the pledgee- creditor. 61. In case of legal pledge or pledge by operation of law, if the thing held in pledged by operation of law is sold by the creditor in public auction resulting to excess, who shall be entitled to the excess? a. The debtor/owner of the thing sold even if not stipulated. b. The creditor or foreclosing party if stipulated. c. The creditor or foreclosing party even if not stipulated. 4. The debtor/owner of the thing sold only if stipulated. 62. In case of legal pledge or pledge by operation of law, if the thing held in pledged by operation of law is sold by the creditor in public auction resulting to deficiency, may there be recovery of deficiency by the creditor? a. Noeven if stipulated because any stipulation for recovery of deficiency in of pledge is void. b. Yes even if not stipulated. ¢. Yes but it must be stipulated by the contracting parties. 4. No because it is pledged by operation of law. eS (CRAR~ Regulatory Framework for Business Transactions RFBT 8708 Page 8 of 2063. 64. 65 66. 67. 68. 69, 70. ceas IL is a contract whereby the debtor or third person secures to the creditor the fulfillment of a principal obligation, specially subjecting.to such security immovable property or real rights over immovable property in case the principal obligation is not complied with atthe time stipulated. Contract of Real estate mortgage b. Contract of Chatte! mortgage ©. Contract of Pledge 4. Contract of Antichresis The following are the essential requisites of a contract of real estate mortgage for its validity, except a. That it be constituted to secure the fulfillment of a principal obligation. That the mortgagor be the absolute owner of the thing mortgaged. ©. That the person constituting the mortgage must have the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. 4. That the document in which the mortgage appears be recorded in the Registry of Property. The following are the important characteristics of contract of real estate mortgage, except a. Accessory — It cannot exist without a principal obligation. '. Indivisible — It creates a lien on the whole or all of the properties mortgaged, which lien continues until the obligation it secures has been fully p Inseparable ~ It subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. d. Real right— It creates a lien on the property mortgaged. €. Real contract ~It is perfected by the delivery of the thing mortgaged. ‘Which of the following statements pertains to equitable mortgage? a. It is one which is created by the agreement of the parties b. It is one executed pursuant, to an express requirement of a provision of law. ©. It is one which although lacks certain formality, form or words or other requisites provided by statute, shows the intention of the parties to charge the real property as a security for a debt and contains nothing contrary to law. The following may become object of contract of real estate mortgage, except a, Immovable property b. Real property ¢. Rights on immovable property 4. Personal property ‘What is the status of contract of real estate mortgage if the property covered as collateral is a personal property instead of real property? a. The contract of real estate mortgage is always void because the subject matter of real estate mortgage is immovable property. b. The contract of real estate mortgage may be valid as to the contracting parties on the basis of doctrine of estoppel but the third person directly affected by said void contract may ask for its declaration of nullity. ©. The contract of real estate mortgage will be valid to both contracting parties and even third persons. d. Third persons who are not directly affected by the real estate mortgage may ask for the declaration of nullity of the real estate mortgage contract. Which of the following statements concerning formalities of real estate mortgage is incorrect? a, The real mortgage may be in any form to be valid since it is a consensual contract, b. The real mortgage must be in a public instrument for the convenience of the parties but not for validity, c. The real mortgage must be registered in the Registry of Property to bind third persons, 4, The real mortgage must be in writing to be valid since it isa formal contract. ‘The contract of real estate mortgage shall cover the following (R-I-N-G-I-R), exeept Real property mortgaged Improvements Natural accessions Growing fruits paeogp Indemnity granted or owing to the proprietor from the insurers of the property mortgaged or in virtue of expropriations for public use. Rents and income not yet received when the obligation becomes due Future inheritance of the mortgagor ‘Regulatory Framework for Business Transactions REBT B706 Page 9 of 201 ‘The following stipulations concerning real estate mortgage are null and void, except ‘a. A stipulation forbidding the owner from alienating the immovable mortgaged. , A stipulation providing that the mortgagee shall become the automatic owner of the property mortgaged upon failure of the debtor to pay the principal obligation, ©. Tipo or upset price which refers to price set by the parties as the amount at which the property at which the property will be sold at public auction, 4. A stipulation prohibiting a second mortgage with respect to property registered under the Torrens System. 72. It refers to the right of mortgagor to redeem the mortgaged property after his default of the performance of his obligation by paying the secured obligation in order to prevent the public sale of his mortgaged property. a. Equity of redemption b. Right of redemption ©. Right of preemption 4. Equity of preemption 73. It refers to the right of the mortgagor to repurchase the property within a certain period after it was sold in public auction for the payment ofthe secured debt. . Equity of redemption b. Right of redemption c. Right of preemption 4. Equity of preemption 74. It refers to the remedy available to the mortgagee by which he subjects the property mortgaged to the satisfaction of the obligation secured when the principal obligation is not paid when due or when there is any violation of any condition, stipulation or warranty by the mortgagor. 8. Dation en pago b. Foreclosure ©. Novation 4. Compensation 75. It is a type of foreclosure made through the filling of a petition in court under Rule 68 of Rules of Court and availed of when the deed of real estate mortgage does not contain a special power of attorney (SPA) authorizing the extrajudicial foreclosure by the mortgagee-creditor. a. Legal foreclosure b. Conventional foreclosure ©. Judicial foreclosure 4. Extra-judicial foreclosure 76. In case of judicial foreclosure, if upon the trial in such action the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and other charges as approved by tho court, and costs, and shall render judgment for the sum so found due and order that the same be paid to the court or to the judgment obligee. This is known as equity of redemption of judgment debtor and the amount shall be paid by the judement debtor. What is the period for exercise of equity of redemption in case of judicial foreclosure? 8. Within a period of not less than 90 days nor more than 120 days from the entry of judgment. b. Within a period of not less than 1 year nor more than 2 years from the entry of judgment. ¢. Within a period of not less than 90 days nor more than I year from the entry of judgment. 4. Within a period of not less than 120 days nor more than 1 year days from the entry of judgment. 11, In case the judgment debtor in judicial foreclosure failed to exercise his equity of redemption, the property shall be ordered by the trial court to be sold at public auction. In such a case, the foreclosure sale, generally, when confirmed by an order of the court, shall operate to divest the rights of all the parties to the action and to vest their rights in the purchaser. May the judgment debtor stil redeem the property already foreclosed and sold in public auction? a. Yes because he has right of redemption which is 1 year from the confirmation of the sale. b. No he can never redeem the property because the equity of redemption has already expired. ©. Yes because he can exercise his equity of redemption even beyond the 90 days from entry of judgment or even after the foreclosure sal itself as long as it is prior to the court's order of confirmation of the sale. 4. Yes because his right of redemption is not subject to a period. 78. Is the right of redemption available to the judgment debtor in case of judicial foreclosure? a. Yes in all instances. b, No except in those cases provided by special laws, ©. No in all instances. 4d. Yes except in those cases provided by special laws. rr CRAR.— Regulatory Framework for Business Transactions © REBT 8706 Page 10 of 20 _479, Under Section 47 of RA No. 8791 (General Banking Laws), in the event of foreclosure made by banks, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan or other evedit ‘accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right of redemption. What is the period for exercise of right of redemption in case of judicial or extrajudicial foreclosure made by banks? a. within one year after the sale ofthe real estate, b. within 90 days after the sale of the real estate. ©. within 6 months year after the sale of the real estate. d. within 2 years after the sale of the real estate. 80. It is @ type of foreclosure made in compliance with Act No. 3135 (Real Estate Mortgage Law) whereby foreclosure sale is made under a special power of attorney inserted in the real estate mortgage contract which authorized extrajudicial foreclosure. a. Legal foreclosure b. Conventional foreclosure ©. Judicial foreclosure d. Extra-judicial foreclosure 81. When a real property is foreclosed and sold under Act No. 3135 (Real Estate Mortgage Law) in case of extra- Judicial foreclosure of Real Estate Mortgage, the public auction sale shall be made at the 8. Province where the property is situated b. Domicile of the mortgagor ¢. Domicile of the mortgagee 4. Atany place in the Philippine 82. In all cases of extrajudicial foreclosure made under Act No. 3135 (Real Estate Mortgage Law), the following Persons may redeem the real property sold in the public auction, except Debtor-mortgagor Successor in interest of debtor-mortgagor Judgment creditor of the debtor-mortgagor ‘Any person having a lien on the real property sold subsequent to the mortgagee or deed of trust ‘Any third person paege 83. In extrajudicial foreclosure, sale of foreclosed real property in contract of real estate mortgage shall be made in a. Public auction or sale only b. Private auction or sale only ©. Generally public auction or sale unless there is agreement for private auction or sale 4d. Generally private auction or sale unless there is agreement for public auction or sale 84. In case of extrajudicial foreclosure of real property under Act No, 3135 (Real Estate Mortgage Law), what is the period of the exercise of right of redemption by the debtor-mortgagor or any other persons authorized by the said law? 8. Within the term of one year and after the date of sale or registration of the sheriffs certificate of foreclosure sale, b. Within the term of 90 days and after the date of extrajudicial sale or registration of the sheriffs certificate of foreclosure sale. ©. Within the term of two years and after the date of extrajudicial sale or registration of the sheriffs certificate of foreclosure sale. jin the term of six months and after the date of extrajudicial sale or registration of the sheriffs certificate of foreclosure sale. 4. 85. Notwithstanding Act No. 3135 (Real Estate Mortgage Law), under Section 47 of RA 8791 (General Banking Laws) what is the period of right of redemption available to mortgagor-juridical persons, (corporation, ion, or partnership) in extrajudicial foreclosure made by mortgagee-bank? @. Within 3 months after the foreclosure and sale but not after the registration of the certificate of foreclosure sale with the applicable Register of Deeds. b, Within 6 months after the foreclosure and sale but not after the registration of the certificate of foreclosure sale with the applicable Register of Deeds. ©. Within 1 year after the foreclosure and salebut not after the registration of the certificate of foreclosure sale with the applicable Register of Deeds. 4. Within 2 years after the foreclosure and sale but not after the registration of the certificate of foreclosure sale with the applicable Register of Deeds. CRAR.— Regulatory Framework for Business Transactions RFBT 8706 Page 11 of 2086. 87. 88. Z5 89. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Real Estate Mortgage is higher than the principal obligation and costs, which is true? 8, The mortgngee may retain the excess inthe absence of stipulation to the contrary. b. The mortgagor is entitled to the excess in the absence of stipulation to the contrary. ©. The mortgagee shall always retain the excess. 4, The mortgagor shall always recover the excess. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Real Estate Mortgage is lower then the principal obligation and costs, which is true? ‘a, The mortgagee may recover the deficiency in the absence of stipulation to the contrary. b. The mortgagor shall not pay the deficiency in the absence of stipulation to the contrary. c. The mortgagee shall always recover the deficiency. 4. The mortgagor shall always pay the deficiency Indicate the proper order on how the proceeds of sale from judicial or extrajudicial foreclosure of Real Estate Mortgage shall be distributed: Cost of sale. Claim of the person foreclosing the mortgage. Claims of junior encumbrances in the order of their priority. Mortgagor or his agent. a I--M-iv b. I-M--IV « I-I-IV-0 4d. M--1-Iv tis a conditional sale of personal property as security for the payment of a debt, or the performance of some other obligation specified therein, the condition being that the sale shall be void upon the seller paying to the purchaser & sum of money or doing some other act named. If the condition is performed according to its terms the mortgage and sale immediately become void, and the mortgagee is thereby divested of his title. 8. Contract of Real estate mortgage b. Contract of Chattel mortgage ©. Contract of Pledge 4. Contract of Antichresis 90. The following are the requisites of chattel mortgage for its validity, except ‘a, That it be constituted to secure the fulfillment of a principal obligation. 'b. That the mortgagor be the absolute owner of the thing mortgaged ©. Thet the person constituting the mortgago must have the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. 4. That the document in which the mortgage appears be recorded in the Chattel Mortgage Register. €. That an affidavit of good faith must be appended to the Deed of Chattel of Mortgage and recorded therewith in the Chattel Mortgage Register. 91. What is the formality required by law in contract of chattel mortgage to bind or affect third persons? 8. That an affidavit of good faith must be appended to the Deed of Chattel of Mortgage and recorded therewith in the Chattel Mortgage Register. b. That the contract of chattel mortgage be registered in IPO. c. That the contract of chattel mortgage be in private instrument. 4. That the contract of chattel mortgage be registered in Registry of Deeds, 92, The following are the important characteristics of contract of chattel mortgage, except ‘8. Accessory — It cannot exist without a principal obligation or contract of loan, b. Indivisible — It creates a on the whole or all of the properties mortgaged, which lien continues until the obligation it secures has been fully paid. ©, Inseparable — It subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. 4. Real contract ~ It is perfected by delivery of the personal property mortgaged. 93. The following may become object of chattel mortgage, except CPA: 8, Personal property b. Movable property . Intangible assets, 4. Real or immovable property ‘Framework for Business Transactions RFBT 8706 Page 12 of 20| 94,18 foreclosure stil aliowed even ifthe collateral in contract of chattel mortgage is real property? ‘a. No because the contract is void. b. No because the contracting parties are guilty of estoppel. c. Yes but foreclosure shall be done under chattel mortgage law. 4, Yes but foreclosure shall be done under real estate mortgage law 95. The following are the rules for the place of registration of Chattel Mortgage, except ‘8, As a general rule, it must be recorded in the Chattel Mortgage Register of the province where the mortgagee resides, b. It must be recorded in both Chattel Mortgage Registers of the provinces where the mortgagor resides and where the property is located, ¢. If the mortgagor is domiciled outside the Philippines, the mortgage must be registered in the Chattel Mortgage Register where the property is located. With respect to motor vehicles, it must be registered with Chattel Mortgage Register where the mortgagor resides and with Land Transportation Office where the motor vehicles are recorded. ©. With respect to shares of stock, it must be registered with Chattel Mortgage Register in the province where the corporation has its principal office and in the Chattel Mortgage Register of the province of domicile of the mortgagor. With respect to vessel, it must be registered in the office of the Philippine Coast Guard of the port of documentation of the vessels. 96. Which of the following statements concerning contract of chattel mortgage is correct? a. The mortgagee is not obligated to file an independent action for the enforcement of his credit or loan secured by a chattel mortgage. To do otherwise would defeat the purpose of the chattel mortgage, which is to give him preference over the mortgaged chattels for the satisfaction of his credit. 'b. A mortgagee who sues and obtains a personal judgment against a mortgagor upon his credit waives thereby his right to enforce the Mortgage securing it and therefore no longer allowed to foreclose the chattel mortgage. c. Both A and B d. Neither A nor B 97. What is the grace period granted to mortgagor or the minimum period required to lapse from the time of the breach of the condition in Chattel Mortgage before the mortgagee may extrajudicial sell or foreclose in the public. auction the mortgaged property? (Equity of Redemption in Chattel Mortgage) a. At least 30 days b. Atleast 60 days ©. At least 90 days d. At least 120 days 98. Is there is right of redemption in contract of chattel mortgage? Yes within a period of one year Yes within a period of three months ‘Yes within a period of six months None aege 99. When a movable property is foreclosed and sold under Act No. 1508 for Chattel Mortgage, the public auction sale by a public officer shall be made at the public place of municipality Domicile of mortgagor b, Location of movable property c. Domicile of mortgagee d. Either A or B 100. In extrajudicial foreclosure, sale of foreclosed personal property in contract of chattel mortgage shall be made in Public auction or sale only b. Private auction or sale only ©. Generally public auction or sale unless there is agreement for private auction or sale 4, Generally private auction or sale unless there is agreement for public auction ot sale 101. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Chattel Mortgage is higher than the principal obligation and costs, which is true? a. The mortgagee may retain the excess in the absence of stipulation to the contrary. b. The mortgagor is entitled to the excess in the absence of stipulation to the contrary. ©. The mortgagee shall always retain the excess, 4. The mortgagor shall always recover the excess. CRAR— Regulatory Framework for Business Transactions | RFBT 8706 Page 13 of 20102. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Chattel Mortgage is lower than the principal obligation and costs, which is true? a. The mortgagee may recover the deficiency in the absence of stipulation to the contrary. b. The mortgagor shall not pay the deficiency in the absence of stipulation to the contrary. ©. The mortgagee shall always recover the deficiency. 4. The mortgagor shall always pay the deficiency 103. Indicate the proper order on how the proceeds of sale from judicial or extrajudicial foreclosure of Chattel Mortgage shall be distributed: 1. Costof sale. I. Claim of the person foreclosing the mortgage, TH. Claims of junior encumbrances in the order oftheir priority. TV. Mortgagor or his agent. a, I-I--1V b. I-II-I-IV ©. 0-1-1V-™ 4d. MI-U-I-IV 104, Tt 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. a. Contract of Real estate mortgage b. Contract of Chattel mortgage ©. Contract of Pledge d. Contract of Antichr 105. ‘The following are the important characteristics of contract of antichresis, except 8, Accessory —It cannot exist without a principal obligation or contract of loan. b. Indivisible ~ It creates ien on the whole or all of the properties used as collateral, which lien continues ‘until the obligation it secures has been fully paid. ¢. Inseparable — It subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. 4. Real right — It creates a lien on the property mortgaged. ©. Real contract Itis perfected by the delivery of the thing mortgaged. 106. Which of the following may become the object of contract of antichresis? Immovable property Movable property Both A and B Neither A nor B poe 107. In contract of antichresis, what shall be the basis of measurement of the fruits in its application to the interest and principal of the loan? a. The actual market value of the fruits at the time of the application. b. The actual market value of the fruits at the time of harvest. c. The actual market value of the fruits at the time of sale of fruits. d. The actual market value of the fruits at the time of perfection of the contract of antichresis. 108. ‘What is the nature of the contract of antichresis? a, Itis a consensual contract perfected by mere consent. b. It isa real contract perfected by delivery of the real property. c. It is a formal or solemn contract perfected by the execution of the written instrument containing the antichretic agreement together with the amount of the principal and interest of the loan. 109, ‘Who shall be liable to pay the real property taxes and expenses nocessary for the repair and preservation of the real property used as collateral in contract of antichresis? Always antichretic creditor . Always debtor ‘Antichretic creditor in the absence of stipulation to the contrary Debtor in the absence of stipulation to the contrary 110, Upon non-payment or default of the antichretio debtor of the principal obligation, may the antichretic. creditor automatically appropriate the real proporty used as security? ‘a, No because itis pactum commissorium which is prohibited by law and public policy. b. Yes because the prohibition against pactum commissorium is not applicable to contract of antichresis. * c. Yes because it i the right of the creditor. » d._ Yes ifit is agreed upon by the parties. TS CRAG, Regulatory Framework for Business Transactions RFBT 8706 Page 14 of 20‘Comparison of Pledge, Real Morigage, Chattel Mortgage and Antichresis contract Conventional Pledge | Real Estate Mortgage | __ Chattel Mortgage “Antichresis Difference “Type of Contact| Real — By delivery of | Consensual — By mere | Formal ~ By registation of | Formal — By execution of astoperfecion | object consent the contract of charel | witten agreement of, mortgage in the Chattel | antichresis with statement of Mortgage Registry the amount of principal and ingerest ofthe contract of loan. To Cindi | Mast be ina public | Mast be resisted ia the | Mont be accompanied by [Mus be registered in the persons instrument showing | Registry of Propery affidavit of good faith Registry of Propery escription of the thing pledged and the date ofthe pledge ‘Object of contact | Movable or personal | Immovable oreal propery | Movable or personal | Immovable or real property property propery Prohibition egainst | Applicable “pplieable “Applicable “Applicable peetun commissorium Inivistblity of te | naive Thdivisbie Taine inaivisibve Remedy of Creditor in case of Foreclose security and sell the collateral in public Foreciose security and sell the collateral in public action Foreclose security and sell | Gather the Guits of the land the collateral in public action | and apply the fair market recovered even if there is @ pultion. Any stipulation for recovery of deficieney null and void. (Exception Legal Pledge) Debtor's default | action with the proceeds to | with the proceeds 10 be | with the proceeds to be | value ofthe fruits at the time bbe applied to the unpeid | applied to the unpaid | applied to the unpaid | of application first to the obligation obligation obligation interest of the loan and the remainder to the principal of the loan. ‘Ast defiieney | Deficiency ean never be | Deficiency ean be recovered | Deficiency can be recovered | Deficiency can be recovered unless there is stipulation to the contrary unless there is stipulation to | through continuous gathering the contrary. (Except in case | of fruits ‘of personal property sold in installment under Recto Law) As to excess oF proceeds Excess belongs tothe pledgee-creditor unless there is stipulation to the contrary. (Exception = Legal Pledge) Excess belongs to the mortgagor unless there is stipulation tothe contrary. Excess belongs to” the | Excess fruits belongs to the mortgagor unless there is | owner of the land or stipulation tothe contrary. | antichretc debtor. ‘AS to appropriation of property The pledge may appropriate the thing pledged if the same is not sold in two public auetions. The mortgagee cannot appropriate the thing. mortgaged. “The morigagee cannot | The aniiehreti erediior cannot appropriate the thing | appropriate the land used as mortgaged. collateral but may sell the fruits to be applied to interest and principal of loan As wo selling of Property after the The pledgor may only sell the propery with the ‘The morigagor can sell the property. Any stipulation ‘The morgagor can sell the | The antichretic debtor can sell property. Any stipulation | the land. of the parties delivers to another, cithes something not consumable so thatthe latter may use the same for a certain time and return pledge or mortgage | consent ofthe pledgee. | prohibiting the mongacor to | prohibiting the mortgagor to by the owner, sellthe property is void. | sell the property is void. Conduct of sale of| Pubic sale oly ‘GR: Public ste ‘GR: Public sale Not applicable foreclosed propery Exception: Private sale_if | Exception: Private sale by creditor stipuated by contracting | if stipulated by contacting ates Redemption None but pledgor can ial foreclosure —| Equity of vedemption only | Not applicable prevent the public sale by | Equity of redemption and | within 30 days ftom default paying the secured | right of redemption io pay the secured obligation Obligation Judicial foreclosure — | to prevent the. foreclosure . Generally equity of | sale redemption only” unless provided by special law. Name of | Contract of Commodatum | Contract of Loan or | Contract of Deposit Contract of Lanse Contract Mutuum Definition Tis a contract wherein one | It isa contact whereln one of | Wie a contract wherein aw] is & conlact wherela” one the partes delivers to another ‘money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid person receives a thing | pany binds himself to give belonging to another, with | another the enjoyment oF use the obligation of safely | of a thing for a price certain, keeping it and of returning | and for a period which may be the same and the the | definite or indefinite. safekeeping of the thing delivered is the principal purpose ofthe contract. ‘Subject matter 1, Non-consumable thing 2. Consumable thing but only for purpose of exhibit T Money 2 Consumable thing T, Consumable thing T, Real property 2.Non-consumable thing | 2: Personal property (Characteriaties 1. Real 2. Essentially gratuitous T Read 2. Onerous if there is interest or gratuitous if thers is no interest. Real T, Consensual 2 Onerous if there | 2: Onerous epositary fee oF gratuitous if for fre. RAR. Regulatory Framework for Business Transactions RFBT 8706 Page 15 of 20I11.tis a contract, whereby a person binds himself to render some service or to do something in representation or in behalf of ‘another, with the consent and authority of the latter. a, Contract of agency b. Contract of partnership ~ ©. Contract of sales 4. Contract of pledge 112.The following are the characteristics of contract of agency, except . Principal - it can stand by itself. Preparatory —It is a means by which other contracts may be entered into, Consensual ~ Its perfected by mere consent. ‘Onerous — It is presumed to be onerous unless declared to be gratuitous. ‘Nominate — It has a name given to it by law. Bilateral - The parties are bound reciprocally to it by law. Commutative ~ The parties give and receive almost equivalent values, Formal contract ~ It is perfected by writen special power of attorney. 113. What is the status of the contract of agency in case the principal is capacitated and the agent is incapacitated? ‘a. Voidable b. Valid and binding c. Unenforceable d. Null and void 114. What isthe status of the contract efitered into by an agent, who is incapacitated, in behalf of the principal who is capacitated? a. Voidable b. Valid and binding ©. Unenforceable d. Null and void 115.The following statements pertain to the principal in a contract of agency, except a. Heis the person whom the agent represents, b. He must be capacitated, ©. He gives authority to the other party. 4. He acts and represents the other party. 116. What type of relationship exists between the principal and agent? ‘a. Fiduciary relationship based on trust and confidence. b. Investor-investee relationship ¢. Debtor-creditor relationship 4. Protector-beneficiary relationship 117.Contract of agency may be express or implied. An agency may be implied from the following, except a. Acts ofthe principal b._ Silence of the principal ©. Lack of action of the principal 4. Failure ofthe principal to repudiate the agency knowing that another person is acting in his behalf without authority. €. Special power of attorney by the agent in the principal's name ifthe authority of 118. What is the status of the written sale of a piece of land of the prin ‘the agent is not in writing? a. Null and void b. Unenforceable c. Voidable d. Rescissible 119. What isthe status ofthe contract entered into by the agent in behalf ofthe principal if the act performed by the agent requires special power of attomey and the authority ofthe agent is only general? . Voidable b. Valid and binding ©. Unenforceable Noll and void 120.1f the agency is couched in general terms, only general power of attorney is required even ifthe principal should state that he withholds no power, thatthe agent may execute acts he may consider appropriate or even though the agency should authorize ‘general or unlimited management, Which ofthe following acts can bs performed by the agent in this case? ‘a Toadminister the property. b. Toeffect novation. © Tocompromise liability 4. To submit questions to arbitration. PAR Regulatory Framework for Business Transactions RFBT 8706 Page 16 of 20121. The following acts require special power of attomey from the principal, except ‘a. To lease any personal property to another person for more than a year. b. Tomake such payments as are not usually considered as acts of administration ¢, Toeffect novations which put an end to obligations already in existence atthe time the agency was constituted 4. To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired ©. To waive any obligation gratuitously £. To enter inte any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or fora valvable consideration To make gifts, except customary ones for charity or those made to employees in the business managed by the agent To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration To lease any real property to another person for more than one year To bind the principal to render some service without compensation To bind the principel in a contract of partnership To obliget= he principal as a guerantor or surety To create or convey real rights over immovable property To accept ot repudiate an inheritance To ratify or recognize obligations contracted before the agency To perfor any other act of strict dominion, rr Popgrre: 122.The acceptance by the agent of the contract of agency may be express or implied. The following are considered implied acceptance, except 8. Acts of the agent to camry oat the agency. b. Silence or inaction by the agent according to the circumstances. , © Between persons who are present, if the principal delivers his power of attorney to the agent and the later accepts it without ary objection. Between persons who are absent, when th prinspal transmits his power to the agent, andthe later returns it with objection. ©. Between persons who are absent, when the principal entrusts to him by letter or telegram a power of attorney with Fespect to tho business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. 123, Which of the following statements is incorrect? When a person is appointed as special agent through special information, the person appointed will be considered @ duly author‘zed agent with respect to the person who received the special information. b. When a person is appointed as special agent through a public advertisement, the person appointed will be considered a duly authorized agent with respect to persons who had read the newspaper only. © If the annvuncement of the appointment is by special information, revocation shall be made also by special informaticn 4. If the anuouncement of the appointment is by public advertisement, revocation of the appointmnent shall also be ‘made by public advertisement. 124.The following are the basic principles of contract of agency, except a. The agent must act within the scope of his authority. . The agent may do such acts as may be conducive to the accomplishment ofthe purpose of the agency. ©. The limits of the agent's authority shall be considered exceeded even it has been performed in a manner more advantages to the principal than that specified by hitn. The agent must actin behalf of his principal and should disclose the principal. 125.The following are the effects if the agent acts within the scope of his authority but in his (agent's) bebalf or without disclosing the principal, except ‘The principe' has no right of action against the person with whom the agent has contracted. b. The person with whom the agent fas contracted has no right of action against the principal. ©. The agent is directly bound in favor of the one with whom he has contracted. 4. The contract does not bind the third person and the principal even if the contract involves thing belonging to the principal, 126.A is authorized by ? to selt his car. A sold the car of P to X in his own name and without disclosing P as his principal. Which of the following statements is correct? ‘a. The contrac: does not bind P because the agent acts in his own name. b. The contract is unenforceable as regards to P. ¢. The contract is null and void. 4d, The contact binds P end X beceuse it involves the property of the principal 127,What is the status of the contract entered into by the agent in excess of the authority of his principal and in the name of the principal or by a person, without authority of another but in the latter's behalf? a. Rescissibie unless ratified by the principal b. Voidable uuless rated by the principal ©. Unenforceable unless ratified by the prine/pal 4. Null and void untess ratified by the principal CRAR — Regulatory Framework for Business Transactions REBT 8706 Page 17 of 20128. What isthe status of the contract entered into by the agent in excess ofthe authority ofthe principal and inthe agents name? ‘a. The contract is enforceable in favor ofthe principal The contracts rescissibe in favor ofthe principal ©. The contract is valid and binding against the agent. 4. The contract is null and vold. 129. What is the obligation of a person appointed as an agent but declines the appointment? ‘He shall deliver and return the goods. b. He shall pay for the price of the goods, ¢, He shall observe diligence of a good father of « family in the custody and preservation of the goods. 4, He has no obligation over the goods. 130.The following are the general obligations of an agent, except ‘a. Tocary out the agency. . Tobe liable for damages through the non-performance, the principal may suffer. ¢. To finish the business already begun on the death of the principal, should delay entail any danger. 4. Tocontinue the agency despite the fact that its execution would manifestly result in loss or damage. 131. The following are the special obligations of an agent, except 1. Toadvance the necessary funds if there was stipulation to that effect except when the principal is insolvent. '. To act in accordance with the instructions of the principal in the execution of the agency and in the absence of instructions ofthe principal, he shall exercise the diligene ofa good father ofa family ‘No to carry out an agency if the execution would manifestly result in loss or damage to the principal. To be liable for damages if there being a conflict between interest and that of the principal, he should prefer his own. Tollend money tothe principal at current interest rate if he has been authorized fo borrow money. To borrow money of the principal at current interest rate without the principal's consent, ifthe latter has authorized ‘him to lend principal's money at interest. Peas 132. The following are the special obligations ofan agent, except 8. To render an accounting of his transactions end to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Any stipulation exempting the agent from the obligation to render an account shall be void. b. Tobe liable for interest on the sums he bas applied to his own use from the day on which he did so and those which he still owes after the extinguishment of the agency. To be responsible not only for fraud, but also for negligence which shall be judged with more or less right by the court. 4 To become personally liable for the contract he entered into in bebalf of the principal if the latter ratified such contract 133.The following are the rules that shall be observed as regards tothe liability of agent when he appoints a substitute, except a. If the agent is not probibited to appoint a substitute, the agent may appoint a substitute but he shall be responsi forthe acts of the substitute Ifthe agent is authorized to appoint a substitute and the principal designated the person to be appointed as substitute, the agent is not responsible forthe acts of the substitute. If the agent is authorized to appoint a substitute and the principal does not designate the person to be appointed as @ substitute, the agent shall be liable if the person appointed as substitute is notoriously incompetent or insolvent man. 4. Ifthe agent is prohibited to eppoint a substitute, the agent cannot appoint a substitute. [fhe appoints one, all the acts ‘of the substitute shall be voidable, 134,What is the degree of liability of two or more agents if they have been appointed simultaneously? ‘a. Joint and severally unless agreed otherwise. Joint or proportionate unless agreed otherwise. ¢. Solidary unless agreed otherwise. 4. No liability unless agreed otherwise. 135. What isthe degree of liability of two or more persons (principals) who have appointed a single agent to the same transaction? a, Joint unless agreed otherwise. '. Joint or propartionate unless agreed otherwise, ©, Solidary unless agreed otherwise, d. No liability unless agreed otherwise. 136.The general rule is that the agent who acts in the name of the principal shall not be ‘The following are the exceptions tothe general rule, except Ifthe agent expressly binds himself, b. Ifthe agent exceeds the limits of bis authority without giving such party sufficient notice of his powers. Ifthe agent acts without the authority ofthe principal, 4. Ifthe principal ratifies the acs ofthe agent which exceed the limits of his authority. 137.What isthe status ofthe contract entered into by the agent without or beyond the authority of the principal ifthe other party was aware of the agent's acting beyond the limits of his authority? If the agent did not undertake to secure the principal's ratification, the contract shall be unenforceable, Ifthe agent did not undertake to secure the principal's ratification, the contract shall be void. b. ‘Ifthe agent did not undertake to secure the principal's ratification, the contract shall be voidable. ‘d._ Ifthe agent did not undertake to secure the principal's ratification, the contract shall be ve ES ORNR.— Regulatory Framework for Business Transactions RFBT 8706 Page 18 of 20138.The following are the rights and obligations of third persons who have contracted with an agent who has exceeded his authority, except 4. "As to third persons, an act is deemed to have been performed within the scope of the agent’s authority, if such act is within the power of attomey, as written, even if the agent has infact exceeded the limits of his authority according to an understanding between the principal and the agent. '. A third person cannot set up the fact that the egent has exceeded his powers, if the principal has rai signified his willingness to ratify the agent's acts. i" ee viet or ied ©. A third person may require the agent to present his power of attorney or the instructions as regards the agency. 4. Private or secret orders and instructions of the pritcipal prejudice third persons who have relied upon the power of attorney or instructions shown them, 139.He is a person who buys and sells goods or chattels consigned or delivered to him by his prin ascommission. —* ‘8. Ordinary agent ', Partnership agent © Commission agent 4. Preferred agent 1, for a compensation known 140.The following are the obligations of « commission agent, except To be responsible for the goods received by him in the terms and conditions and as described in the consignment unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. b. To distinguish by countermarks goods of the same kind and mark which belong to different owners, and designate the merchandise respectively belonging to each principal. &.Tosell the goods on credit 4. To bear the risk of collection and to pay the principal the proceeds of the same on the same terms agreed upon with the purchaser if he receives on a sale, in addition to the ordinary commission, another called a guarantee ‘commission, © To be liable for damages if he does not collect the credits of the principal at the time they become due and demandable, unless he proves that he exercised due diligence for that purpose. 141.P gives a general power of attomey to A to sell P’s goods for P10,000 cash for a commission, A sells the goods on a 15-day ‘eredit term for P11,000 to B without authority from P. What is the right of P if ke does not ratify the sale on credit? ‘Pay demand immediate payment of P11,000 from A. b. Pmay demand immediate payment of P10,000 from A and A gets the excess of P1,000. ¢. Pmay get the excess of P1,000. 4. Acannot be compelled to pay P10,000 immediately. 142. Using the same data in preceding number, what is the right of P ithe ratifies the sale on credit? @. Prmay demand P11,000 from A immediately. b. Pimay collect P11,000 upon payment of B. © Pray only collect P10,000, 4. A shall only account P10,000 to P. 143.The following are the obligations of the principal in the contract of agency, except ‘4, To.comply with all the obligations which the agent may have contracted within the scope of his authority 'b. To be bound for any obligation wherein the agent exceeded his power if he ratifies such obligation expressly or tacitly ©. To be solidarity liable with the agent if he allowed the latter to act as though he had full powers when the agent exceeded his authority, 4d. To advance 16 the agent the sums necessary for the execution of the agency should the agent so request, ¢. To reimburse the agent the sums advanced by the seller even if the business or undertaking was not successful provided that the agent is free from fault including the interest on the sum, £ To indemnify the agent for all damages which the execution of the agency may have caused the later, without the fault or negligence on his part. When two or more persons have appointed an agent for a common transaction or undertaking, the principals shall be Jointly liable for all the consequences of the agency. 144, The following are the instances wherein the principal shall not be liable forthe expenses incurred by the agent, except ‘When the agent acted in contravention of the principals instructions and the principal avails himself of the benefits derived from the contract. b. When the expenses were due tothe fault ofthe agent ‘¢. When the agent incurred them with knowledge that an unfavorable result would ensue if the principal was not aware thereof, 4. When it was stipulated that the expenses would be bome by the agent, or thatthe latter would be allowed only a certain amount. the right of the agent over the object of the agency until the principal reimburses him for the sums necessary for the ‘execution of the agency which he had advanced and until the principal pays him the indemnity for all damages in the ‘execution of the agency? 8. Right to appropriate the property b. Right to sell the property ©. Right to retain in pledge the property or legal pledge. 4. Right to destroy the property —— OBAR— Regulatory Framework for Business Transactions RFBT 8706 Page 19 of 20146,When two persons contract with regard to the same movable thing, one of them with the agent, and the other with the principal, and the two contracts are incompatible with each other, who between the buyers shall be preferred? First possessor in good faith. b. The buyer ofthe principal €. The buyer of the agent, 4. Person with older ttle. 147,When two persons contract with regard to the same immovable thing, one of them with the agent, and the other with the principal, and the two contracts are incompatible with each other, who between the buyers shall be preferred?” First registrant in good faith, . First possessor in good faith. ‘Buyer with older ttle 4. Buyer ofthe principal. Buyer ofthe agent. 148. The following are the modes of extinguishment of contract of agency, except: (EDWARD) E~ Expiration ofthe period for which the agency was constituted. D~ Death, Civil interdiction, Insanity or Insolvency of the principal or agent. W- Withdrawal of the agent. ‘A— Accomplishment of the object or purpose of the agency. R— Revocation of the agency by the principal. D— Dissolution of the firm or corporation which entrusted or accepted the agency. S~ Signing of special power of attorney (SPA) appointing the agent wmeaeee 149.Revocation refers to the act of the principal of terminating the agency at will. The principal may revoke the agency at will ‘and compel the agent to return the document evidencing the agency. The revocation may be express or implied. The following acts are considered implied revocation, except a. When a new agent is appointed for the same business or transaction. b. Ifthe principal directly manages the business entrusted to the agent, dealing directly with third persons. ©. When a special power of attorney is granted to an agent with a general power of attomey. 4, When the principal assist the agent. 150.As a general rule, the principal may revoke the contract of agency at will. The following are the exceptional instances when contract of agency may not be revoked at will by te principal, except a. Ifa bilateral contract depends upon an agency b. Ifthe agency is a means of fulfilling an obligation already contracted. ©. Ifa parmer appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. 4. Ifthe agency is coupled with interest. ©. Ifthe agency is forthe benefit of the principal. 151.The following statements conceming revocation are true, except If the agency has been entrusted for the purpose of contracting with specified persons, the principal must give a timely notice of the revocation to such third persons. b. If the agent had general powers, he was entrusted to contract with general public or any person, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation, Notice of revocation of general powers in a newspaper of general circulation is sufficient waming to third persons, 4d. Revocation does not bind third persons who had knowledge thereof. 152.The following statements concerning withdrawal by the agent are true, except a. The agent must give notice tothe principal of the withdrawal ’. The agent must indemnify the principal for any damage suffered by reason of the withdrawal. ©. The agent shall not be liable for withdrawal if itis based upon the impossibility of continuing the performance of the i agency without grave detriment to himself 4. The agent who withdraws should not take eare ofthe object of the agency if his reason is valid. 153.As a general rule the death of the principal extinguishes the agency. However, the agency is not extinguished by the death of ‘the principal in the following exceptional instances, except Ifthe agency has been constituted in the common interest of the principal and the agent. '. Ifthe agency has been constituted in the interest ofa third person who has accepted the stipulation in his favor. © In o faras to finish the business already begun on the death of the principal, should delay entail any danger, 4. Ifthe agency has been constituted in favor ofthe principal 154.What is the status of the acts done by the agent afier the death of the principal or other cause of extinguishment of the ‘agency? ' 4. The acts are unenforceable becauso the agency is already extinguished, . ‘The acts are null and void because the agency is already extinguished, & The acts are valid if done with the knowledge of the death of the principal or of any other cause of extinguishment and shall be fully effective with respect to third persons who may have contracted in bad faith. 4 The acts are valid if done without the knowledge of the death of the principal or of any other cause of extinguishment and shall be fully effective with respect to third persons who may have contracted in good faith. -END- CRAR— Regulatory Framework for Business Transactions REBT 8706 Page 20 of 20