ReSA

The Review School of Accountancy

Tel. No. 735-9807 & 734-3989

BUSINESS LAW Atty. M.S. Bonafe Jr.

Law on Pledge and Mortgage

1. D constituted a chattel mortgage on his car as security for the loan he obtained from
C of P1M. It was further stipulated that the same mortgage shall secure the payment
of another loan which the debtor D may incur in the future. Is the chattel mortgage
valid?
a. The chattel mortgage for both loans is valid
b. The mortgage for the P1M is the only one valid
c. The mortgage as regards the future loan is the one valid
d. The mortgage is extinguished because of the void stipulation on the ground
that it cannot secure a future obligation

2. (1) In conventional pledge, there is no deficiency liability on the part of the pledgor
inspite of stipulation to the contrary.
(2) In legal pledge, the excess of the proceeds of the sale after foreclosure shall
pertain to the pledgor even in the absence of stipulation.
a. Both statements are false c. First is false, second is true
b. Both are true d. First is true, second is false

3. Chattel mortgage as distinguished from pledge:

a. The excess over the amount due after foreclosure goes to the debtor
b. The sale of the object in an auction extinguishes the obligation
c. The delivery of the personal property is necessary
d. The registration of the property in the Registry of Property is not necessary.

4. The following are essential requisites common to pledge and mortgage except one:
a. They are constituted to secure the fulfillment of a principal obligation
b. The pledgor or mortgagor is the absolute owner of the thing pledged or
mortgaged
c. The contract of pledge or mortgage is registered with the Register of
deeds
d. The person constituting the pledge or mortgage has the free disposal of the
thing or he is legally authorized for the purpose

5. (1) In all cases of extra judicial foreclosure, the right of redemption can be exercised
buy the mortgagor within one year from and after the juridical registration of sale.
(2) In judicial foreclosure, the mortgagor may still exercise his equity of redemption
after the confirmation of the sale by the court.
a. Both statements are true c. First is false, second is true
b. Both are false d. First is true, second is false
6. A pledged his Toyota car to B for a loan of P1M. A was unable to pay the loan and
therefore sold the car in a public auction but it was sold only for P.5M. Can B recover
the deficiency from A?
a. No, he cannot recover the deficiency on the absence of contrary stipulation
b. No, he cannot even if there is an agreement that he can
c. Yes, he can even in the absence of stipulation allowing him
d. Yes, he can, provided it was agreed upon by the parties

7. A pledged his wristwatch to B pawnshop for a loan of P7,000 which he failed to pay.
B sold the watch at a public auction for P4,000.
a. The pawnshop B can recover the P4,000 deficiency from A
b. It cannot recover the deficiency from A unless there is stipulation to the
contrary
c. It cannot recover the deficiency even if there is stipulation allowing it
d. It cannot recover the deficiency if there is stipulation disallowing recovery

8. The following are instances of pledge created by operation of law, except:

a. Hotelkeeper retains the things brought into the hotel by the guest who cannot
pay his hotel bill
b. An agent retains in pledge the thing which is the object of the agency
until he is paid his commission
c. A mechanic retains the car he repaired until he is paid
d. A depository retains the thing in pledge until full payment of what is due him

9. A pledge his wristwatch to B for a loan of P.1M. Due to A’s failure to pay his debt, B
auctioned the watch and was sold to C for P.15M. Can A recover the excess?
a. A cannot recover the excess even if so stipulated by the parties
b. A can recover the excess if so agreed upon by the parties
c. A can recover the excess even if not so stipulated
d. A stipulation allowing the excess to go to the pledgor is void

10. (1) In a pledge created by operation of law, after payment of the debt and expenses,
the remainder of the price of the sale in auction shall be delivered to the obligor,
pledgor being entitled to the excess.
(2) If a credit which has been pledged becomes due before it is redeemed, the
pledgee may collect and receive the amount due and apply the same to the payment
of his claim with the excess going to the pledgor.
a. Both statements are false c. First is false, second is true
b. Both are true d. First is true, second is false

11. A mortgaged his Rolex watch to B for a loan of P.2M. Due to the failure of A to
redeem the security, B sold the same at public auction for P.15M to the highest
bidder.
a. B can recover the deficiency of P.05M from A
b. B can recover the deficiency from A if so stipulated
 c. B can recover the deficiency if there is no contrary agreement
d. B cannot recover the deficiency even if there is stipulation

12. The difference between a chattel mortgage and a pledge is that in chattel mortgage:
a. The delivery of the personal property is necessary
b. The registration of the contract with the Register of Deeds needed
c. The excess over the amount due after foreclosure sale goes to debtor
d. The debtor is not liable for the deficiency after foreclosure

13. X borrowed money from Y and gave a piece of land as security by way of mortgage.
It was agreed between the parties that upon non-payment of the loan, the land
would already belong to Y. If X failed to pay the debt, would Y now become the
owner of the land?
a. Y would become the owner because it was agreed upon by them based on
the principle of autonomy of contracts
b. Y would not become the owner because the agreement that he would
become the owner upon default of X is against the law
c. Y would become the owner but with right of redemption by X
d. Y would not become owner if X annuls the voidable agreement

14. Suppose in the preceding question, the agreement between X and Y was that if X
defaulted in the payment of his debt, it shall be paid with the land mortgaged to Y.
Would your answer be the same?
a. Yes, because it is still an agreement prohibited by law
b. Yes, because the agreement is voidable which X can annul
c. No, because stipulation is not against the law
d. No, provided the stipulation is in writing

15. In the province, a farmer couple borrowed money from the local merchant. To
guarantee payment, they left the Torrens Title of their land with the merchant, for
him to hold until they pay the loan. It is:
a. Pledge c. Real mortgage
b. Mortgage of chattel d. None of the above

16. A constructed a building on a parcel of land he leased from B. He chattel mortgaged

the building to C. The building is concrete.
a. No chattel mortgage because the building is real property
b. There is chattel mortgage as agreed upon by the parties
c. No chattel mortgage unless it is registered with the Registry of Deed
d. No chattel mortgage because the building can never be considered movable
despite agreement of parties

17. In 1982, D borrowed P.4M from C, collateral by a pledge of shares of stocks of X

corporation worth P.8M. In 1983, because of the economic crisis, the value of the
shares pledged fell to only P.1M. Can C demand that D surrender the other shares
worth P.7M?
 a. Yes, because the collateral as security for the loan was worth P.8M and
therefore the other shares of P.7M must be delivered
b. No, because the only right of C is to sell the shares at the public auction
and keep the proceeds as security for the loan
c. No, because the right of C is to demand immediate payment of the loan
d. No, because the right of C is to demand another thing worth P.8M

18. C lent to D P.1M. As security for the loan, D pledged his Rolex watch. When D failed
to pay the loan, C foreclosed the pledge, and the watch was sold only for P.08M.
May C still claim payment of the deficiency from D?
a. D is no longer liable for the deficiency unless otherwise agreed
b. D is not liable for the deficiency despite stipulation to the contrary
c. D is still liable for the deficiency even in the absence of agreement
d. D is still liable if agreed upon

19. In the preceding case, suppose it was a contract of mortgage, can C still claim
payment of the deficiency?
a. Yes, provided it was agreed upon
b. No, unless there was stipulation
c. Yes, even in the absence of stipulation
d. No, even if stipulated

20. Still in the preceding case, suppose the watch was sold at a price greater than the
amount of loan, who is entitled to the excess?
If pledge:
a. C is entitled to the excess even in the absence of stipulation
b. C is entitled if there is stipulation
c. D is entitled even if there is no stipulation
d. D is not entitled even if there is no stipulation

21. If chattel mortgage:

a. C is entitled to the excess unless there is a contrary stipulation
b. D is entitled if so stipulated
c. C is entitled even in the absence of stipulation
d. D is entitled even if not stipulated

22. A constituted in 1999 a real estate mortgage on his land and a chattel mortgage on
his car to secure the payment of a debt of P.2M which he then owed to B, as well as
other loans he may receive from him in the future. A paid his debt of P.2M but not
the loan of P.03 which he obtained in 2000. Can A foreclose both mortgages for the
P.03M loan obtained in 2000?
a. No, because the mortgagee can only foreclose one of the mortgages applying
the Recto Law to prevent collection of deficiency
b. No, only the mortgage on the car can be foreclosed
c. No, only the mortgage on the land can be foreclosed
d. Yes, both mortgages
23. D mortgage his land to C with the stipulation that the former cannot sell his land
before he has paid his loan to C. D sold the land to X despite such agreement.
Which of the following is correct?
a. The contract of sale is void
b. The consent of C is necessary before D can sell the land
c. The stipulation prohibiting sale of the land is void
d. The sale is valid if the buyer was not aware of the mortgage

24. D obtained a loan from C. X pledged his car as security. Which of the following is not
correct?
a. The pledge is not valid because the debtor is not the owner of the thing
pledged
b. The pledgor must be the owner of the thing pledged
c. The thing pledged must be delivered to the pledgee or a third person by
common consent of the parties
d. The pledgee does not become owner of the thing pledged upon the non-
payment of the debt

25. D used his bicycle to C as a security for a loan with the agreement that D shall
remain in possession of the said bicycle until the loan is paid. The contract is one of:
a. Pledge c. Chattel mortgage
b. Real mortgage d. Loan only