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CREDIT FINALS REVIEWER MATRIX

Guaranty Suretyship
Primary or accessory Accessory (2052) Accessory (2052)

A guaranty cannot exist without Same as in guaranty

a valid obligation.

Nevertheless, a guaranty may be

constituted to guarantee the
performance of a voidable or an
unenforceable contract. It may
also guarantee a natural
obligation.

It may also be given as security

for future debts, which cannot
be claimed until the debt is
liquidated. (2053)
Personal or Real Personal if guaranty or Same as in guaranty
suretyship
A person bound to give a legal
Real if pledge, chattel mortgage, or judicial bond, if unable to do
real mortgage, or antichresis so, may give a pledge or
mortgage sufficient to cover his
obligation (2083)
Nature of liability Subsidiary and secondary, with Primary, direct, immediate, and
the benefit of excussion absolute (De Leon)
generally (2058)
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Parties to the contract Creditor and guarantor Creditor, debtor, and surety

There may be a guarantor even The debtor has knowledge of

without the knowledge or who the surety is because a) the
consent, or against the will of surety is a party to the original
the debtor. (2050) In this case, contract, and b) the surety's job
the provisions of Articles 1236 is to make sure the debtor pays
and 1237 shall apply: the debt

1236: The guarantor may

recover only insofar as the
payment has been beneficial to
the debtor

1237: The guarantor cannot

compel the creditor to subrogate
him in his rights, such as those
arising from a mortgage,
guranty, or penalty
Origin Conventional (contract), legal, Same as in guaranty
or judicial
Warranty Solvency of the principal debtor Fulfillment of the debt itself
Number of contracts Two One

The guranty is a collateral The surety is part of the original

undertaking contract, and is solidarily liable
Discharge by mere indulgence Usually, YES Usually, NO (De Leon)
or want of notice
Gratuitous or onerous Generally, YES (2048) Generally, NO (Usually done as
a business, that's why it's
The consideration which regulated by the Insurance
supports the principal obligation Code)
is sufficient to support the
guaranty. The consideration which
supports the principal obligation
is sufficient to support the
suretyship.
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Construction Strictly in favor of the gurantor, Strictissimi juris not applicable

unless the guaranty is onerous. in compensated sureties
(2055)
Sureties who are actually doing
insurance business are covered
by the Insurance Code. (De
Leon)
Form Must not only be expressed, but Suretyship is also not presumed,
also reduced in writing. must be express (2055)

A guranty is not presumed; it However, suretyship is NOT

must be express and cannot COVERED BY THE STATUTE
extend to more than what is OF FRAUDS (De Leon)
stipulated therein. (2055)

Covered by Statute of Frauds

(1402 (2b)) – a special promise
to answer for the debt, default,
or miscarriage of another
Qualifications 1) Integrity Same as in guaranty
2) Capacity to bind himself
3) Sufficient property to answer Judicial bondsman also has the
for the obligation which he same qualifications in Art. 2056,
gurantees (2056) and in special laws (2082)

Creditor may demand another

with the same qualities if the
gurantor is convicted in the first
instance of a crime involving
dishonesty, or should become
insolvent.

The person who furnishes the

gurantor ansers for these
qualities.
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Benefit of excussion? YES. The gurantor cannot be NO.

compelled to pay the creditor
unless the latter has exhausted A judicial bondsman also does
all the property of the debtor, not have the same benefit as he
and has resorted to all the legal is a surety (2084)
remedies against the debtor.
(2058)

This excussion shall not take

place:
1) If the gurantor has expressly
renounced it
2) If he has bound himself
solidarily with the debtor
3) In case of insolvency of the
debtor
4) When he has absconded, or
cannot be sued within the
Philippines unless he has left a
manager or representative
5) If it may be presumed that an
execution on the property of the
principal debtor would not result
in the satisfaction of the
obligation. (2059)
How to set up benefit or Guarantor sets it up upon WALA. NONE. ASA KA PA.
excussion demand, and points out debtor's
available property in the
Philippines. (2060) This right is
not impaired by a judgment
against the debtor. (2062)

Creditor suffers loss to the

extent of the property pointed
out that he did not go after.
(2061) He shall ask the court to
notify the guarantor in case of
any action he may take against
the debtor. (2062)
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Sub-guarantors' rights Benefit of excussion against the N/A

guarantors and principal debtor
(2064)
Co-guarantors' rights Benefit of division (2065) only N/A
if there is ONE DEBTOR, and
for the SAME DEBT, unless
solidarity is stipulated, or any of
the circumstances enumerated in
Article 2059 occur

Co-guarantor who pays may

demand of each of the others the
share which is proportionally
owing from him (2073) only if
PAYMENT MADE IN VIRTUE
OF JUDICIAL DEMAND or
THEPRINCIPAL DEBTOR IS
INSOLVENT

In the immediately preceding

case, the co-guarantors may set
up against the one who paid the
defenses which would have
pertained to the principal debtor
against the creditor, which are
not purely personal (2074)

Sub-guarantor of a co-guarantor
is liable to the other co-
guarantors in case of the
particular co-guarantor's
insolvency (2075)
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Effect of compromise Compromise between creditor Same as in guaranty

and debtor benefits but does not
prejudice the guarantor.

Compromise between creditor

and guarantor benefits but does
not prejudice the guarantor.
(2063)

If the guarantor has

compromised with the creditor,
he cannot demand of the debtor
more than what he has really
paid. (2069)

A release made by a creditor in

favor of one of the co-
guarantors, without the consent
of the others, benefits the others
to the extent of the share of the
guarantor to whom it has been
granted. (2078)
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Indemnification and The indemnity comprises: Same as in guaranty

subrogation 1) The total amount of the debt
2) The legal interests thereon
from the time the payment was
made known to the debtor, even
though it did not earn interest
for the creditor
3) The expenses incurred by the
guarantor after having notified
the debtor that payment had
been demanded of him
4) Damages, if they are due
(2066)

The guarantor who pays is

subrogated by virtue thereof to
all the rights which the creditor
had against the debtor. (2067)

OF COURSE, 1237 applies if

the guarantor paid without the
knowledge, consent, or against
the will of the debtor –
guarantor cannot compel the
creditor to subrogate him in his
rights. (2050)
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Effect of guarantor paying Cannot compel subrogation N/A

without debtor's knowledge from creditor (2050, 1237)

Debtor may set up all the

defenses which he could have
set up against the creditor at the
time the payment was made
(2068)

The guarantor has no remedy

against the debtor, but only
against the creditor, except in
the case of a gratuitous guaranty,
if the guarantor was prevented
by a fortuitous event from
advising the debtor of the
payment, and the creditor
becomes insolvent (2070)
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Extinguishment Extinguished at the same time as Art. 2076 also applies

the principal debtor (2076) and
for the same causes as all other
obligations (1231) – OBLICON

Creditor accepts dation in

payment (1245), even if creditor
is later evicted (1548) – the
principal obligation is revived,
but the guaranty is not (2077)

Extension granted to the debtor

by the creditor without the
consent of the guarantor (2079)
– does not extinguish the
principal debt

Co-guarantors are released, even

if they are bound solidarily,
whenever by some act of the
creditor they cannot be
subrogated to the rights,
mortgages, and preferences of
the latter (2080) (e.g. if the
creditor fails to collect sums due
to the debtor, leading to the
debtor's funds being exhausted
by other creditors)
Defenses available to The guarantor may set up N/A
guarantor against the creditor all the
defenses which pertain to the
principal debtor, and are
inherent in the debt; but not
those that are purely personal to
the debtor (2081)

Pledge (and Chattel Real Mortgage Antichresis

Mortgage, in so far as
not conflicting with
the Chattel Mortgage
Law)
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Perfection Pledge – delivery of the Real Formal

thing (real contract)
However, possession by The amount of the
It is necessary that the the mortgagor is not principal and of the
thing pledged be placed necessary interest shall be in
in the possession of the writing, otherwise, the
creditor, or of a third contract of antichresis
person by common shall be void (2134)
agreement (2093)

Chattel Mortgage –
registration of the
mortgage in the Chattel
Mortgage Register
(formal contract)

By a chattel mortgage,
personal property is
recorded in the Chattel
Mortgage Register as a
security for the
performance of an
obligation (2140)
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Kinds 1) Voluntary 1) Voluntary Voluntary

2) Legal (2121) 2) Legal (2125 par. 2)
3) Equitable (1602)
For Chattel Mortgage,
voluntary In legal mortgage, the
mortgagee has no other
Examples of legal right than to demand
pledge: the execution and the
recording of the
1) Art. 546 – Possesor document in which the
in good faith may hold mortgage is formalized
the thing in pledge until
reimbursement of the Presumption of
necessary expenses equitable mortgage:

2) Art. 1731 – He who 1) When the price of a

has executed work upon sale with right to
a movable has a right to repurchase is unusually
retain it by way of inadequate
pledge until he is paid
2) When the vendor
3) Art. 1994 – Unpaid remains in possession
depositary may keep as lessee or otherwise
the things deposited in
pledge 3) When upon or after
the expiration of the
right to repurchase
another instrument
extending the period of
redemption or granting
a new period is
executed

4) When the purchaser

retains for himself a
part of the purchase
price

5) When the vendor

binds himself to pay the
taxes on the thing sold

6) In any other case

where it may be fairly
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Subject matter All movables which are 1) Immovables Fruits of an immovable

within commerce, of the debtor (2132)
provided they are 2) Alienable real rights
susceptible of in accordance with the
possession (2094) laws, imposed upon
immovables (2124)
Incorporeal rights,
evidenced by Extends to the natural
negotiable instruments, accessions,
bills of lading, shares of improvements, growing
stock, bonds, fruits, rents or income
warehouse receipts – not yet received when
the instrumen must be due, and the amount of
delivered to the indemnity from insurers
creditor, and if of the property or
negotiable, must be expropriation for public
indorsed (2095) use (2127) unless there
is a stipulation to the
contrary (De Leon)
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Right of possession Creditor or a third Retained by owner, Creditor, only for the
person by common unless otherwise purpose of receiving the
agreement (2093) until stipulated, or the fruits (De Leon)
the debt is paid (2098) property is alienated
The debtor cannot
Chattel mortgage – reacquire the enjoyment
retained by owner, of the immovable
unless otherwise without first having
stipulated totally paid what he
owes the creditor
The pledgee: (2136)

1) Cannot deposit the The creditor may

thing with third persons compel the debtor to
unless authorized by enter again upon the
stipulation (2100) enjoyment of the
property, in order to
2) Cannot use the exempt the creditor
things pledged without from paying taxes and
the authority of the expenses for
owner, and if he should preservation and repair,
do so, or misuse the except when there is a
thing in any other way, stipulation to the
the owner may ask that contrary (2135, 2136)
it be judicially or
extrajudicially
deposited (2104), but
the owner may use the
thing only for the
purpose of preservation

3) May cause the thing

to be sold at a public
sale if it is in danger of
destruction,
impairment, or
diminuition of value,
without the fault of the
pledgee (2108), in
which case, the
proceeds become the
things pledged

4) Shall take care of the

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Requisites 1) That it be constituted 1) That it be constituted That the contract of

to secure the fulfillment to secure the fulfillment antichresis be
of a principal obligation of a principal obligation constituted to apply the
fruits for the payment
2) That the pledgor be 2) That the mortgagor of interest, if owing,
the absolute owner of be the absolute owner and thereafter to the
the things pledged of the things mortgaged principal of the credit
(2132)
3) That the persons 3) That the persons
constituting the pledge constituting the Must be in writing, or
have the free disposal mortgage have the free else, void (2134)
of their property, and in disposal of their
the absence thereof, property, and in the
that they be legally absence thereof, that
authorized for the they be legally
purpose (2085) authorized for the
purpose (2085)
Delivery for pledge
(2093) In addition to the
requisites stated in
Registration for chattel Article 2085, it is
mortgage (2140) indispensable, in order
that a mortgage may be
A pledge shall not take validly constituted, that
effect against third the document in which
persons if a description it appears be recorded
of the thing pledged in the Registry of
and the date of the Property. If the
pledge do not appear in instrument is not
a public instrument recorded, the mortgage
(2096) but it is not is nevertheless binding
necessary for validity between the parties.
(2125)
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Indivisibility YES YES YES

Even though the debt Even though the debt Articles 2089 to 2091
may be divided among may be divided among are applicable to the
the successors in the successors in contract of antichresis
interest of the debtor or interest of the debtor or (2139)
of the creditor (2089) of the creditor (2089)

Even though the Even though the

debtors are not debtors are not
solidarily liable (2090) solidarily liable (2090)
Obligations Valid obligations, and Valid obligations, and Valid obligations, pure
guaranteed even voidable, even voidable, and conditional (2139,
unenforceable, and unenforceable, and 2091)
natural obligations natural obligations
(2052, 2086) (2052, 2086)

Pure or conditional Pure or conditional

(2091) (2091)
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Remedies for non- For conventional/ Extrajudicial Specific performance

payment of the voluntary pledge: foreclosure (Act No.
obligation 3135) Judicial foreclosure
- Proceed before a (Rule 68, Rules of
Notary Public to the Judicial foreclosure Court)
sale of the thing (Rule 68, Rules of
plaedged (2112) Court)
- The debtor must be
notified of the sale by
public auction, and the
amount for which it is
to be held
- If the thing is not sold
at the first auction, a
second auction with the
same formalities shall
be held
- If after the second
auction, the thing is not
yet sold, the creditor
may appropriate it, as
an exception to the
prohibition on pactum
commissorium (2088)
- The pledgor has a
better right if he offers
the same terms as the
highest bidder (2113)
- The pledgee's offer is
not valid if he is the
only bidder
- If the pledgee accepts
an offer not to pay the
purchase price at once,
the pledgee is deemed
to have received the
purchase price, as far as
the pledgor is
concerned (2114)
- The pledgee shall
promptly advice the
pledgor of the result of
the public auction
(2116)
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Other methods of Return of the thing Payment by a third N/A

extinguishment pledged to the owner person in possession of
(2110) the mortgaged property,
if the creditor claims
Statement in writing by from such third person,
the pledgee that he but only to the extent of
renounces or abandons the part of the credit
the pledge, in which secured by the property
case, acceptance by the (2129)
owner nor return is
unnecessary, and the
pledgee becomes a
depositary (2111)

Sale of the thing

pledged, in which the
debtor is not entitled to
the excess (2115), but
the mortgagor in a
chattel mortgage is
entitled to the excess
(Chattel Mortgage
Law)

Payment by a third
person who has any
right in the thing pledge
(2117)
Is thing alienable? YES, subject to the YES, and any YES, and the transferee
pledge, upon consent of stipulation forbidding it is bound by the contract
the pledgee (2097) is void (2130), but the of antichresis if it is
transferee is bound to registered
respect the mortgage, it
being a real right