Source: https://www.scribd.com/document/97513716/Credit-Transaction-Reviewer
Timestamp: 2017-03-01 18:39:57
Document Index: 244793381

Matched Legal Cases: ['Art.1236', 'Art.1237', 'Art. 2051', 'Art.2051', 'art.2059', 'Art. 2059', 'ART. 2065', 'ART.2089']

Credit Transaction Reviewer | Guarantee
BrowseInterestsBiography & MemoirBusiness & LeadershipFiction & LiteraturePolitics & EconomyHealth & WellnessSociety & CultureHappiness & Self-HelpMystery, Thriller & CrimeHistoryYoung AdultBrowse byBooksAudiobooksNews & MagazinesSheet MusicBrowse allUploadSign inJoinGUARANTY *Contract of Guaranty- by guaranty, a person (guarantor); -binds himself to the creditor; -to fulfill the obligation of the principaldebtor; -in case the latter should fail to do so. *Strictly speaking, the contract between the debtor and guarantors is called the contract of indemnity. *On the other hand, the contract between the guarantor and creditor is the contract of guaranty. *Guaranty may be: -Personal- which may be in the form of: 1. Guaranty 2. Suretyship -Real- here the guaranty is property. 1. If real property- the guaranty may be in the form of: a. Real Mortgage b. Antichresis 2. If personal property- the guaranty may be in the form of: a. Pledge b. Chattel Mortgage *If guarantor failed to comply with his obligation, such default is merely civil and NOT criminal. It is error therefore, to convict the guarantor of estafa. *If guaranty is OFFERED, notice of acceptance from the creditor is necessary. (Reason: Meeting of the minds.) -EXCEPTIf the guaranty is a direct and unconditional one. In such a case, all that is required is for the creditor to act upon the promise. *Other characteristics: 1. Consensual 2. Nominate 3. Accessory 4. Unilateral (in that only the guarantor is obligated to the creditor and not vice versa) *Form: It is governed by the Statute of Frauds, being a special promise to answer for the debt, default, or miscarriage of another. Hence, an oral promise of guaranty is NOT enforceable. *Distinction of Guaranty from Surety Guaranty Surety 1.Subsidiary liability -Primary liability 2.Pays if debtor CANNOT -Pays if debtor DOES NOT 3.Insurer of the debtor’s -Insurer of debt solvency *General Rule: A guaranty is GRATUITOUS. -ExceptIf there is a stipulation to the contrary. *If Guaranty is W/O Debtor’s Consent - A guarantor can recover from the debtor what the former has paid to the creditor, but the recovery will only be to the extent that the debtor had been benefited. (Art.1236) - Guarantor cannot raise the right of subrogation. (Art.1237) *Classification According to the Manner of Creation: 1. Conventional (by agreement) 2. Legal (required by law) 3. Judicial (required by the court as when an attachment is to be lifted) *Sub-guaranty- to guarantee an obligation of a guarantor. (Art. 2051)
*By express provision of the 2nd par. of Art.2051, a guaranty can be valid even if the principal obligation is: 1. Voidable 2. Unenforceable 3. Natural *There can be guaranty for: 1. Present Debts 2. Future Debts even if the amount is not yet known. *Obligation of the guarantor may be less but NOT more than the obligation of Principal Debtor. -Thus, if the principal debt is not secured by a mortgage, the guaranty should also not be secured by a mortgage. Otherwise, this would be making the guarantor’s liability more onerous than that of the principal debtor. *Rule if Debt is Increased If the indebtedness is increased without the guarantor’s consent, he is completely released from the obligation as guarantor or surety. *Liability of Guarantor for Interest If a guarantor upon demand fails to pay, he can be held liable for interest, even if in thus paying, the liability becomes more than that in principal obligation. -ReasonThe increased liability is not because of the contract but because of the default and the necessity of judicial collection. *Date of interest runs from the time the complaint is filed, NOT from the time the debt becomes due and demandable. *Kinds of Guaranty According to Period or Condition 1. With a term (express or implied) 2. With a condition (suspensive or resolutory) 3. Simple or Indefinite (no period specified; no amount fixed) *Simple or Indefinite Guaranty -If the guaranty be simple or indefinite, it shall comprise not only the principal obligation but also all its accessories, including judicial costs, provided with respect to the latter, that the guarantor shall only be liable for those costs incurred after he had been judicially required to pay. *A guaranty is strictly construed against the creditor and in favor of the guarantor or surety. *A guarantor is not liable for past defaults of the debtor. -ReasonA guaranty has only prospective, not retroactive effect, unless the contract clearly indicates a contrary intent. *Qualifications of a Guarantor: 1. Integrity at the time of perfection. 2. Capacity to bind at the time of perfection. 3. Sufficient property at the time of perfection; excluding his properties that may be out of reach or which are under litigation. *Effect of Conviction of a Crime Involving Dishonesty -General RuleThe creditor may demand a substitute guarantor. (This right may be waived) -ExceptionWhen the guarantor had been selected by the creditor. Effects of Guaranty -General RuleThe creditor must sue ONLY the principal debtor. -ExceptionUnless the guarantor is NOT entitled to the benefit of excussion. *Benefit of Excussion- is the right of the guarantor; -to have all the properties of the debtor; -and all legal remedies against him first exhausted -before he can be compelled to pay the creditor.
*Duty of Creditor (ERUN) If the creditor wants to hold the guarantor liable, he must do the following: 1. Exhaust all the property of the debtor unless the guarantor is not entitled to such benefit under art.2059; 2. Resort to all the legal remedies against the debtor; 3. Prove that the debtor is still unable to pay; 4. Notify the guarantor of the debtor’s inability to pay, otherwise if the guarantor is prejudiced by lack of notice, he cannot be held liable, unless there is waiver on the part of guarantor. *One good way of proving inability to pay is to prove an UNSATISFIED WRIT OF EXECUTION that has been returned. *Art. 2059- When Guarantor is not Entitled to Benefit of Excussion (RSIAP) 1. If the guarantor has expressly renounced it; 2. If he has bound himself solidarily with the debtor; 3. In case of insolvency of the debtor; 4. When the debtor 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. *Requisites Before Guarantor Exercise the Benefit of Excussion: 1. Guarantor must set it up when the creditor demands payment. 2. Guarantor must point out available properties of the debtor within the Philippines. *The creditor can only demand AFTER judgment has been rendered against the principal debtor. *If the guarantor has complied with the requisites above stated, the creditor who is negligent in exhausting the property pointed out shall suffer the loss, to the extent of said property. *Benefit of Division Should there be several guarantors of only one debtor and for the same debt, the obligation to answer for the same is divided among all. The creditor cannot claim from the guarantors except the shares which they are respectively bound to pay, unless solidarity is expressly stipulated. (ART. 2065) *Article 2066- Rights of the Guarantor AFTER payment: (TIED) 1. The total amount of the debt; 2. The legal interest 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. *Guarantor can exercise the RIGHTS OF SUBROGATION. It is believed that this can only be availed of only by a guarantor who became such with the knowledge and consent of the principal debtor. *The benefit of subrogation is by operation of law, thus there is no necessity for the guarantor to ask the creditor to expressly assign his rights of action. *Article 2069 If the debt was for a period and the guarantor paid it before it became due, he cannot demand reimbursement of the debtor until the expiration of the period unless the payment has been ratified by the debtor. *Article 2070 *Guarantor must recover from CREDITOR If the guarantor has paid without notifying the debtor, and the latter not being aware of the payment, repeats the payment, the former has no remedy whatever against the debtor, but only against the creditor. *Gratuitous Guaranty—Creditor Insolvent
In case of gratuitous guaranty, if the guarantor was prevented by a fortuitous event from advising the debtor of the payment, and the creditor becomes insolvent, the debtor shall reimburse the guarantor for the amount paid. *Article 2071- Rights of the Guarantor BEFORE Payment: The guarantor, even before having paid, may proceed against the principal debtor: (SIP-D-TAD) 1. When he is sued for payment; 2. In case of insolvency of the principal debtor; 3. When the debtor has bound himself to relieve him from the guaranty within a specified period, and this period has expired; 4. When the debt has become demandable, by reason of the expiration of the period for payment; 5. After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless it be of such nature that it cannot be extinguished except within a period longer than ten years; 6. If there are reasonable grounds to fear that the principal debtor intends to abscond; 7. If the principal debtor is in imminent danger of becoming insolvent. *General Purpose of Article 2071 -To obtain release from the guaranty; -To demand security. *Liability of Co-Guarantors -They are liable only to their proportionate share. -If any of the guarantors should be insolvent, his share shall be borne by the others, including the payer, in the same proportion. -Liability of co-guarantors will only apply if there is payment by virtue of judicial demand and if the principal debtor is insolvent. EXTINGUISHMENT OF GUARANTY *Two Causes of Extinguishment of Guaranty 1. Direct- when the guaranty itself is extinguished, independent of the principal obligation. 2. Indirect- when the principal obligation ends, the accessory obligation of guaranty naturally ends. *Effect of Novation If a contract is novated without the guarantor’s consent, the guaranty ends. Thus, novation in this case is a direct extinguishment. *If the interest rates are increased w/o the guarantor’s consent, he is not liable for the increase but is still liable for the principal obligation and the original interest rate. *KINDS OF EXTINGUISHMENT: 1. Novation 2. Dacion en Pago 3. Extension of period for payment without the consent of the guarantor. 4. If there is an act or inaction of creditor preventing subrogation to the guarantors. *Article 2078 A release made by the creditor in favor of one of the guarantors, WITHOUT the consent of the others, benefits all to the extent of the share of the guarantor to whom it has been granted. LEGAL AND JUDICIAL BOND *Bondsman- one who is offered in virtue of a provision of law or a judicial order to provide a bond which will stand as guaranty for the principal obligation. He is also considered a surety. *Rule if Bond is NOT Given In case bondsman shall not be able to give bond, a pledge or mortgage may be made. *Benefit of excussion is not available to bondsman and subsurety. *REQUISITES FOR THE CONTRACT OF PLEDGE AND MORTGAGE (SODA) 1. That they be constituted to secure the fulfillment of a principal obligation;
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;
*Rule if Pledgor Deceived Creditor 1. Creditor may claim another thing in its stead; 2. Demand immediate payment of the obligation.
*Future property CANNOT be mortgaged or pledged because of the lack of ownership. *If the principal debt is voidable, unenforceable, or merely natural, the pledge or mortgage is still VALID. *When the principal obligation becomes due, the things pledged or mortgaged may be alienated for the payment of creditor. (Dacion en Pago) -General Rule as to Indivisibility- (ART.2089) A pledge or mortgage is indivisible, even though the debt may be divided among the successor in interest of the debtor or of the creditor. -EXCEPTIn case there are several things given in mortgage or pledge , wherein each one of them guarantees only a determinate portion of a credit. -ExampleA borrowed P1million from B, secured by the pledge of a ring for a debt of P200,000; and by a mortgage on A’s land, for the balance of P800,000. If A pays P200,000, he can now demand the return of the ring. *Promise to constitute a pledge or mortgage gives rise to PERSONAL RIGHTS. *It is necessary that the thing pledged be placed in the possession of the creditor, or of a third person by common agreement. *Real property CANNOT be pledged. *Requisites for Pledge of Incorporeal Rights: 1. The instrument (e.g bills of lading, negotiable instruments) proving the right pledged must be DELIVERED. 2. If negotiable, said instrument must be INDORSED. *Requisites for Pledge to Bind 3rd Persons: 1. A public instrument must be made. 2. The instrument must contain the DESCRIPTION of the thing pledged and the DATE of the pledge. *Article 2099 The creditor shall take care of the thing pledged with the diligence of a good father of a family; he has a right to the reimbursement of the expenses made for its preservation, and is liable for its loss or deterioration. *Fruits and interest may compensate for those to which the pledgee himself is entitled or may be applied to the principal. *Despite ownership by the pledgor, the pledge may exercise certain rights of the owner. *Article 2106 If through the negligence or willful act of the pledge, the thing pledged is in danger of being lost or impaired, the pledgor may require that it be deposited with third person. *Article 2107 If there are reasonable grounds to fear the destruction or impairment of the thing pledged, without the fault of the pledge, the pledgor may demand the return 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. *Article 2108 If, without the fault of the pledgee, there is danger of destruction, impairment, or diminution in value of the thing pledged, he may cause the same to be sold at a public sale. The proceeds of the auction shall be a security for the principal obligation in the same manner as the thing originally pledged.
EXTINGUISHMENT OF PLEDGE *Article 2110- If the thing pledged is returned by the pledge to the pledgor or owner, the pledge is extinguished. *Article 2111- Pledgee renounces or abandons the pledge. In this case, the pledgee becomes a depositary. *If credit has not been satisfied in due time, creditor may appropriate the thing pledged provided that the following requisites are complied with: (DIAN) 1. The debt is already DUE. 2. There must be the INTERVENTION of a notary public. 3. There must be a public AUCTION (if at first, it is not sold, a second auction must be held with the same formalities) 4. NOTICE to the debtor or owner stating the amount due, that is, the amount for which the public sale is to be held. *Pledgor and pledge may bid at the auction, but pledgee’s offer shall not be valid if he is the only bidder. *The bid must be for cash, for said bids shall offer to pay the purchase price at once. *Rules if the Price at the Sale is More or Less than the Debt -If the price at sale is MORE- excess goes to the creditor, unless contrary stipulations are provided. -If the price is LESS- creditor does NOT get the deficiency.
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