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Q: What is the difference between "guaranty" and "suretyship"? A: Yes, he can recover the deficiency.
the deficiency. The action of AB to go after the

(2010 Bar) surety bond cannot be taken to mean a waiver of his right to demand
payment for the whole debt. The amount received from the surety is
A: Guaranty and Suretyship distinguished: only payment pro tanto, and an action may be maintained for a
deficiency debt.
1. The obligation in guaranty is secondary; whereas, in
suretyship, it is primary. Q: Bruce is the registered owner, of a parcel of land with a building
2. In guaranty, the undertaking is to pay if the principal debtor thereon and is in peaceful possession thereof. He pays the real
cannot pay; whereas, in suretyship, the undertaking is to pay if estate taxes and collects the rentals therefrom. Later, Catalino, the
the principal debtor does not pay. only brother of Bruce, filed a petition where he, misrepresenting
3. In guaranty, the guarantor is entitled to the benefit of to be the attorney-in-fact of Bruce and falsely alleging that the
excussion; whereas, in suretyship the surety is not entitled. certificate of title was lost, succeeded in obtaining a second
4. Liability in guaranty depends upon an independent agreement owner’s duplicate copy of the title and then had the same
to pay the obligations of the principal if he fails to do so; transferred in his name through a simulated deed of sale in his
whereas, in suretyship, the surety assumes liability as a regular favor. Catalino then mortgaged the property to Desiderio who had
party. the mortgage annotated on the title. Upon learning of the
5. The Guarantor insures the solvency of the principal debtor; fraudulent transaction, Bruce filed a complaint against Catalino
whereas, the surety insures the debt. and Desiderio to have the title of Catalino and the mortgage in
6. In a guaranty, the guarantor is subsidiarily liable; whereas, in a favor of Desiderio declared null and void.
suretyship, the surety binds himself solidarity with the
principal debtor. (Art. 2047) Will the complaint prosper, or will the title of Catalino and the
mortgage to Desiderio be sustained? (1991 Bar)
Q: AB sold to CD a motor vehicle for and in consideration of A: Yes, the complaint for the annulment of Catalino’s Title will prosper.
P120,000, to be paid in twelve monthly equal instalments of In the first place, the second owner’s copy of the title secured by him
P10,000.00, each instalment being due and form the Land Registration Court is void ab initio, the owner’s copy
thereof having never been lost let alone the fact that said second
owner’s copy of the title was fraudulently procured and improvidently
payable on the 15th day of each month starting January 1997. issued by the Court. In the second place, the Transfer Certificate of Title
procured by Catalino is equally null and void, it having been issued on
To secure the promissory note, CD (a) executed a chattel mortgage the basis of a simulated or forged Deed of Sale. A forged deed is an
on the subject motor vehicle, and (b) furnished a surety bond absolute nullity and conveys notitle.
issued by Philamlife. CD failed to pay more than two (2)
instalments. The mortgage in favor of Desiderio is likewise null and void because the
mortgagor is not the owner of the mortgaged property. While it may be
AB went after the surety but he was only able to obtain three- true that under the “Mirror Principle” of the Torrens System of Land
fourths (3/4) of the total amount still due and owing from CD. AB Registration, a buyer or mortgagee has the right to rely on what
seeks your advice on how he might, if at all recover the deficiency. appears on the Certificate of Title, and in the absence of anything to
excite suspicion, is under no obligation to look beyond the certificate
How would you counsel AB? (1997 Bar) and investigate the mortgagor’s title, this rule does not find application
in the case at hand because here, Catalino’s title suffers from two fatal must be in a public instrument containing description of the
infirmities, namely: thing pledged and the date thereof to bind third persons.
1. The fact that it emanated from a forged deed of a simulated Q: Are the right of redemption and the equity of redemption given
sale; by law to a mortgagor the same? Explain. (1999 Bar)
2. The fact that it was derived from a fraudulently procured or A: The equity of redemption is different from the right of redemption.
improvidently issued second owner’s copy, the real owner’s EQUITY OF REDEMPTION is the right of the mortgagor after judgment
copy being still intact and in the possession of the true owner, in a judicial foreclosure proceedings, within a period of not less than 90
Bruce. days, before the sale or confirmation of the sale, to pay into the court
the amount of the judgment debt. On the other hand, RIGHT OF
The mortgage to Desiderio should be cancelled without prejudice REDEMPTION is the right of the mortgagor, after the sale of the
to his right to go after Catalino and/or the government for mortgaged property, to redeem the property by paying to the
compensation from the assurance fund. purchaser in the sale or for him to the sheriff who made the sale, the
amount paid by him, with interest, within one year from the sale. There
is no right of redemption, only equity of redemption, in a judicial
Q: In 1982, Steve borrowed P400,000.00 from Danny,
foreclosure under the Rules of Court.
collateralized by a pledge of shares of stock of Concepcion
Corporation worth P800,000.00. In 1983, because of the economic
crisis, the value of the shares pledged fell to only P100,000.00. Can Q: Olivia owns a vast mango plantation which she can no longer
Danny demand that Steve surrender the other shares worth properly manage due to a lingering illness. Since she is indebted to
P700,000.00? (1994 Bar) Peter in the amount of P500, 000.00 she asks Peter to manage the
plantation and apply the harvest to the payment of her obligation
to him, principal and interest, until her indebtedness shall have
A: No. Bilateral contracts cannot be changed unilaterally. A pledge is
been fully paid. Peter agrees.
only a subsidiary contract, and Steve is still indebted to Danny for the
amount of P400,000.00 despite the fall in the value of the stocks
pledged. 1. What kind of contract is entered into between Olivia and
Peter? Explain.
2. What specific obligations are imposed by law on Peter as a
Q: Distinguish a contract of chattel mortgage from a contract of
consequence of their contract?
pledge. (1999 Bar)
3. Does the law require any specific form for the validity of
their contract? Explain
A: In a contract of CHATTEL MORTGAGE, possession belongs to the 4. May Olivia reacquire the plantation before her entire
creditor, while in a contract of PLEDGE, possession belongs to the indebtedness shall have been fully paid? Explain. (1995
debtor. Bar)
A chattel mortgage is a formal contract while a pledge is a A:

realcontract.
A contract of chattel mortgage must be recorded in a public
instrument to bind third persons while a contract of pledge
1. A contract of antichresis was entered into between Olivia and mortgage, does not exist. Moreover, the chattel mortgage is void
Peter. Under Art. 2132, by a contract of antichresis the creditor because it was not registered. Assuming that it is valid, it does not bind
acquires the right to receive the fruits of an immovable of his the Bank because it was not annotated on the title of the land
debtor, with the obligation to apply them to the payment of the mortgaged to the bank. Z cannot demand that the Bank pay him the
interest, and thereafter to the principal of his credit. loan Z extended to X, because the Bank was not privy to
2. Peter must pay taxes and charges upon the land and bear the
necessary expenses for preservation and repair which he may
deduct from the fruits. (Art. 2135)
3. The amount of the principal and interest must be specified in
writing, otherwise the antichresis will be void. (Art. 2134)
4. No. Art. 2136 specifically provides that the debtor cannot
reacquire the enjoyment of the immovable without first having
totally paid what he owes the creditor. However, it is
potestative on the part of the creditor to do so in order to
exempt him from his obligation under Art. 2135, the debtor
cannot re-acquire the enjoyment unless Peter compels Olivia to
enter again the enjoyment of the property.
Q: X constructed a house on a lot which he was leasing from Y.

Later, X executed a chattel mortgage over said house in favor of Z
as security for a loan obtained from the latter. Still later, X
acquired ownership of the land where his house was constructed,
after which he mortgaged both house and land in favor of a bank,
which mortgage was annotated on the Torrens Certificate of Title.
When X failed to pay his loan to the bank, the latter, being the
highest bidder at the foreclosure sale, foreclosed the mortgage
and acquired X’s house and lot. Learning of the proceedings
conducted by the bank, Z is now demanding that the bank
reconvey to him X’s house or pay X’s loan to him plus interests. Is
Z’s demand against the bank valid and sustainable? Why? (1994,
2003 Bar)
A: No, Z’s demand is not valid. A building is immovable or real property

whether it is erected by the owner of the land, by a usufructuary, or by
a lessee. It may be treated as a movable by the parties to chattel
mortgage but such is binding only between them and not on third
parties. (Evangelista v. Alto Surety Col, Inc., G.R. No. L- 11139, April 23,
1958) In this case, since the bank is not a party to the chattel mortgage,
it is not bound by it, as far as the Bank is concerned, the chattel

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Q: What is the difference between "guaranty" and "suretyship"? A: Yes, he can recover the deficiency.

the deficiency. The action of AB to go after the

A chattel mortgage is a formal contract while a pledge is a A:

Q: X constructed a house on a lot which he was leasing from Y.

A: No, Z’s demand is not valid. A building is immovable or real property

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