CREDIT TRANSACTIONS

(LMGTRAN)
FINALS – 03 October 2020
GOOD LUCK!

INSTRUCTIONS:
1. Answer within the time limit (12:45 to 2:30pm). NO EXTENSION.
2. Submit yours answer via messenger: indicate your name (PRINT LEGIBLY), Section & ID number.
3) Choose the best answer
4). Write the letter only of your chosen answer on your answer sheet.
5. This examination consists of EIGHT (8) pages and 103 MCQ.

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1. In commodatum, the bailor retains the ownership of the thing loaned. In simple loan, the ownership passes to the:
A) bailee C) guarantor
B) creditor D) borrower

2. In commodatum, the kind of property involved is:

A) Real property only C) Real or personal property
B) Real and personal property D) Personal property only

3. Mutuum pertains to money or fungible things. Is there a loan if what was delivered is a check?
A) No. A check is neither money nor a fungible thing. C) Yes. A check is deemed a fungible thing.
B) No. Check is not legal tender. D) Yes. A loan may consist in the transmission of the value of money.

4. The delivery of the thing is needed for the perfection of commodatum or mutuum. The delivery should be:
A) Actual. C) Constructive.
B) Actual or constructive. D) Presumed.

5. What is the consideration in commodatum?

A) None. Commodatum is essentially gratuitous. C) The rendering of some service.
B) The use of the fruit of the thing loaned. D) The use or possession of the thing loaned.

6. Martha mortgaged her lot to ChinaBank to secure the loan of Juan. Juan is called as—
A) Principal borrower C) Accommodation mortgagee
B) Accommodation party D) Accommodation mortgagor

7. The death of either the bailor or bailee extinguishes commodatum because of its nature and character as:
A) real contract C) purely personal
B) similar to donation D) essentially gratuitous

8. Pactum commisorium is null and void because—

A) It is violative of the due process requirement of the law.
B) It is contrary to law, morals, good customs and public order.
C) It precludes the mortgagor to redeem the mortgaged property.
D) It is against public policy.

9. The subject matter in simple loan or mutuum is:

A) money and other consumable things. C) money or other consumable things
B) money or other fungible things. D) money and other fungible things

10. In mutuum, if the borrower cannot pay the fungible thing with another of the same kind, quality and quantity, he shall pay the value
of the thing to be determined at:
A) the time of perfection of the loan C) time of payment
B) enforcement of the payment D) the time stipulated by the parties

11) The properties that may be the subject matter of deposit are:
A) fungibles C) movables only
B) movables or immovables D) immovables only

12. A contract where a thing is delivered to another for safekeeping with the obligation of returning upon demand is a:
A) Voluntary deposit C) Involuntary deposit
B) Necessary deposit D) Judicial deposit.

13. May the pledgor alienate the thing pledged?

A) Yes, but with the consent of the pledgee.
B) Yes, because the pledgor remains to be the owner.
C) Yes, but only after a substitution of the thing pledged.
D) No, the pledgor has no right to alienate the thing pledged while the pledge subsists.

14. Who is liable of taking care of the thing pledged?

A) pledgee C) both A & B
B) pledgor D) neither A or B

15. Can the pledgee deposit the thing pledged with a third person?
A) Yes, if there is a stipulation to that effect. C) Either A or B.
B) Yes, if the pledgor consents. D) No. It is absolutely prohibited.

16. P pledged a dog named Bantay to C. Bantay gave birth to five lovely puppies during the effectivity of the pledge. Who will own the 5
puppies? A) P C) Either P or C, depending on their agreement
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 B) C D) Neither as the puppies will form part of the pledge.

17. What happens to the ownership of the thing pledged?

A) The pledgor acquires ownership.
B) The debtor continues to the owner unless stipulated otherwise.
C) The pledgor is subrogated to the rights of the owner.
D) The debtor retains ownership unless expropriated.

18. Necessary deposit is otherwise known as: A) involuntary deposit C) voluntary deposit
B) judicial deposit D) precarium

19. Can the depositary deposit the thing with a third person?
A) No, unless there is a stipulation to the contrary.
B) No, because deposit is founded on trust and confidence.
C) No., because deposit is purely personal.
D) Yes, because of the prerogative provided for by law to the depositary.

20. A deposited coins with B who is authorized to use and dispose the same. A subsequent agreement between the parties as to
interest on the coins was entered into. What kind of contract was the subsequent agreement?
A) mutuum C) deposit
B) commodatum D) necessary deposit

21. If a TV was given to a person with the permission on the part of the latter to use it to maintain its efficiency, what kind of contract
was entered into? A) loan C) irregular deposit
B) commodatum D) mutuum

22. Bruno, surreptitiously entered a hotel and armed with a handgun, divested two hotel guests of their cash and jewelries. Is the hotel
liable? A) Yes. The hotel was negligent in failing to prevent the entry of Bruno.
B) No. The loss was due to a fortuitous event.
C) No. The act of Bruno is deemed a force majeur.
D) Yes. The hotel is always liable for acts of a thief or robber.

23. Vhong, an impostor mortgaged a property titled in the name of Bernis. The mortgage is:
A) Void C) Voidable
B) Valid between the contracting parties. D) Valid.

24. A & B are joint debtors of C in the amount of P100,000.00. To secure the loan, A pledged his watch worth P75,000.00 and B
pledged his ring valued at P25,000.00. A paid P75,000.00 to C, can he (A) ask for the return of his watch?
A) Yes, because the obligation is joint.
B) Yes, because his watch secured the amount of P75,000 only.
C) No. Pledge is indivisible. To release the thing pledged, the entire obligation must be paid.
D) No. The pledge of A did not specify that it is answerable only for a portion of the loan.

25. Can a chattel mortgage secure after-incurred obligations or future advancements?

A) Yes. It is allowed under the Chattel Mortgage Law.
B) No. A chattel mortgage can only cover existing obligations at the time of the mortgage.
C) Yes. So long as it is in substitution of previous loans.
D) No. A chattel mortgage is an accessory contract that is dependent on an existing loan.

26. On 15 March 2010 Banco Filipina (BF) registered the certificate of sale of awarded to it regarding the foreclosure auction sale of the
real property mortgaged by A&B Inc. Can A&B still exercise its right of redemption?
A) Yes. BF can redeem until 15 March 2011.
B) No. The right to redeem terminated with the registration of the certificate of sale.
C) Yes. BF can redeem before the confirmation of the certificate of sale by the court.
D) No. BF should have redeemed the mortgaged property within 3months from the foreclosure auction sale.

27. A sold his car to B that is yet to be registered in the name of A. C guaranteed that B will pay the purchase price if A can show the
registration papers in his (A) name within 10-days; otherwise, the sale is rescinded automatically. What is the effect of the failure to
fulfill the condition? A) Only the guaranty is extinguished.
B) Both the guaranty and the principal debt are extinguished.
C) Only the principal debt is extinguished.
D) No effect on both the principal debt and on the guaranty.

28. The amount of the principal and the interest shall be specified in writing; otherwise the contract of antichresis shall be:
A) valid C) voidable
B) void D) unenforceable

29. It is an accessory obligation whereby a personal property is delivered to the creditor or to a third person by common agreement to
secure the performance of a principal obligation, usually a loan. A) chattel mortgage C) pledge
B) antichresis D) real mortgage

30. A pledge, to be valid between the parties, the property must be placed in the possession of:
A) the creditor C) to either A or B
B) a third person D) to both A and B

31. A sum of money belonging to certain minors was placed by their guardian in the hands of a person who agreed to return the money
on demand. There is no agreement as to the interest but interest was paid, and that person also used the money in his business. What
kind of contract was created? A) guaranty C) commodatum
B) deposit D) mutuum
32. Pedro's car was carnapped while parked in the premises of Anito Hotel, which disclaimed liability for failure of Pedro to notify the
hotel of his parked car and for failure to deliver the car key to the guard in accordance with the policy of the hotel. No written policy was
posted in the hotel premises about the policy of the hotel. Is the hotel liable?
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 A) Yes. There is no way for Pedro to know the unwritten policy of the hotel.
B) No. Pedro failed to observe the precautions prescribed by the hotel.
C) Yes. The hotel will be liable even in the absence of notice.
D) No. There is no showing that Pedro is a guest of the hotel.

33. After locking his hotel room and before sleeping, Jojo placed his watch, jewelries and cash in a bag that he placed under his bed.
The following morning, Jojo found that his room was opened and the bag was missing. The hotel disclaimed liability because Jojo did
not deposit his valuables despite notice to that effect posted in the hotel premises. Is the hotel liable?
A) Yes. It is the nature of the business of hotel to provide not only lodging to travelers but also security for their personal
effect.
B) Yes. The hotel cannot free its self from responsibility by posting notices that it would not be liable for the articles brought by
its guests.
C) No. Jojo failed to give notice of his valuables to the hotel or its employees.
D) No. Jojo failed to observe the precautions of the hotel.

34. Guaranty, as a rule is a gratuitous contract. It becomes onerous only--

A) when there is a stipulation to the contrary.
B) when the guaranty is less than the amount of the principal debt.
C) when the guaranty is more than the amount of the principal debt.
D) when the contract is a surety.

35. A guaranty without the knowledge or consent or against the will of the debtor is:
A) unenforceable C) valid
B) null and void D) voidable

36. A guaranty intended to provide security to future obligation is known as:

A) dragnet clause C) a form of surety
B) a continuing guaranty D) natural obligation

37. What is the effect of death of the principal debtor in a contract of guaranty?
A) The obligation will survive and the estate will be answerable.
B) The obligation and guaranty will be extinguished because debt is personal.
C) Only the principal obligation will be extinguished.
D) Only the guaranty will be extinguished.

PROBLEM. Amador obtained a loan of P300,000 from Basilio payable on March 25, 2012. As security for the payment of his loan,
Amador constituted a mortgage on his residential house and lot in Basilio's favor. Cacho, a good friend of Amador, guaranteed and
obligated himself to pay Basilio, in case Amador fails to pay his loan at maturity.

38.I. If Amador fails to pay Basilio his loan on March 25, 2012, can Basilio compel Cacho to pay?
A) No, Basilio cannot compel Cacho to pay because as guarantor, Cacho can invoke the principle of excussion, i.e., all the
assets of Basilio must first be exhausted.
B) No, Basilio cannot compel Cacho to pay because Basilio has not exhausted the available remedies against Amador.
C) Yes, Basilio can compel Cacho to pay because the nature of Cacho's undertaking indicates that he has bound himself
solidarily with Amador.
D) Yes, Basilio can compel Cacho who bound himself to unconditionally pay in case Amador fails to pay; thus the benefit of
excussion will not apply.

39.II. If Amador sells his residential house and lot to Diego, can Basilio foreclose the real estate mortgage?
A) Yes, Basilio can foreclose the real estate mortgage because real estate mortgage creates a real right that attaches to
the property.
B) Yes, Basilio can foreclose the real estate mortgage. It is binding upon Diego as the mortgage is embodied in a public
instrument.
C) No, Basilio cannot foreclose the real estate mortgage. The sale confers ownership on the buyer, Diego, who must therefore
consent.
D) No, Basilio cannot foreclose the real estate mortgage. To deprive the new owner of ownership and possession is unjust and
inequitable.

PROBLEM. Cruz lent Jose his car until Jose finished his Bar exams. Soon after Cruz delivered the car, Jose brought it to Mitsubishi
Cubao for maintenance check-up and incurred costs of P8,000. Seeing the car's peeling and faded paint, Jose also had the car
repainted for P10,000. Answer the two questions below based on these common facts.

40. I. After the bar exams, Cruz asked for the return of his car. Jose said he would return it as soon as Cruz has reimbursed him for the
car maintenance and repainting costs of P 18,000. Is Jose's refusal justified?
A) No, Jose's refusal is not justified. In this kind of contract, Jose is obliged to pay for all the expenses incurred for the
preservation of the thing loaned.
B) Yes, Jose's refusal is justified. He is obliged to pay for all the ordinary and extraordinary expenses, but subject to
reimbursement from Cruz.
C) Yes, Jose's refusal is justified. The principle of unjust enrichment warrants the reimbursement of Jose's expenses.
D) No, Jose's refusal is not justified. The expenses he incurred are useful for the preservation of the thing loaned. It is Jose's
obligation to shoulder these useful expenses.

41. II. During the bar exam month, Jose lent the car to his girlfriend, Jolie, who parked the car at the Mall of Asia's open parking lot, with
the ignition key inside the car. Car thieves broke into and took the car. Is Jose liable to Cruz for the loss of the car due to Jolie's
negligence?
A) No, Jose is not liable to Cruz as the loss was not due to his fault or negligence.
B) No, Jose is not liable to Cruz. In the absence of any prohibition, Jose could lend the car to Jolie. Since the loss was due to
force majeure, neither Jose nor Jolie is liable.
C) Yes, Jose is liable to Cruz. Since Jose lent the car to Jolie without Cruz's consent, Jose must bear the consequent loss of
the car.
D) Yes, Jose is liable to Cruz. The contract between them is personal in nature. Jose can neither lend nor lease the car to a
third person.
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42. What is the effect if the proceeds in an extra-judicial foreclosure sale is not sufficient to pay for the obligation?
A) the mortgagee can claim for deficiency judgment from the debtor.
B) the mortgagee can claim for deficiency judgment from the mortgagor even though it is a third party mortgage.
C) the mortgagee has no more recourse or claim against the debtor.
D) the mortgagee cannot claim for deficiency judgment from the debtor because it’s an extrajudicial foreclosure.

43. Which phrase best completes the statement-- When a debt is secured by a real estate mortgage, upon default of the debtor:
A) the only remedy of the creditor is to foreclose the real estate mortgage;
B) another remedy is filing an action for collection and then foreclose if collection is not enough;
C) the creditor can foreclose the mortgage and demand collection for any deficiency;
D) the only remedy is to demand fulfilment.

44. X, at Y’s request, executed a Real Estate Mortgage (REM) on his (X’s) land to secure Y's loan from Z. Z successfully foreclosed
the REM when Y defaulted on the loan but half of Y's obligation remained unpaid. May Z sue X to enforce his right to the deficiency?
A) Yes, but solidarily with Y.
B) Yes, since X’s is deemed to warrant that his land would cover the whole obligation.
C) No, since it is the buyer at the auction sale who should answer for the deficiency.
D) No, because X is not Z’s debtor.

45. The period to redeem property sold extrajudicially following a foreclosure of the mortgage of Mr. Pedro is—
A) Three months from the foreclosure auction sale.
B) Before the registration of the certificate of sale which in no case shall be more than 3months after foreclosure, whichever is
earlier.
C) One year from the registration of the certificate of sale.
D) One year from the foreclosure auction sale.

46. What is the basis of the redemption price in cases of judicial foreclosure?
A) As a rule, there is no right of redemption in judicial foreclosure.
B) The amount stipulated in the mortgage document or the outstanding obligation of the mortgage plus interests and
expenses.
C) The amount of principal loan obligation plus legal interest.
D) The amount of principal loan plus one percent interest per month.

47. Filipina Bank (FB) judicially foreclosed the real estate mortgage of mortgage of ES Corp. and was likewise sold in an auction sale
where FB was declared as the highest bidder. The certificate of sale was registered on 18 March 2010 after the court confirmed the
same. May ES still redeem the property today, 17 March 2011?
A) No. There is no right of redemption in judicial foreclosure.
B) No. The redemption period already elapsed with the registration of the certificate of sale on 18 March 2010.
C) Yes. Where the mortgagee is a bank or a banking institution, the mortgagor is entitled to a right to redeem within one year
from registration of the certificate of sale.
D) Yes. When the mortgagor is a juridical entity, there is a right of redemption within one year from registration of the
certificate of sale.

48. X borrowed money from a bank, secured by a mortgage on the land of Y, his close friend. When the loan matured, Y offered to pay
the bank but it refused since Y was not the borrower. Is the bank’s action correct?
A) Yes, since X, the true borrower did not give his consent to Y’s offer to pay.
B) No, since anybody can discharge X’s obligation to his benefit.
C) No, since Y, the owner of the collateral, has an interest in the payment of the obligation.
D) Yes, since it was X who has an obligation to the bank.

49. The right of a mortgagor in a judicial foreclosure to redeem the mortgaged property after his default in the performance of the
conditions of the mortgage but before the sale of the mortgaged property or confirmation of the sale by the court, is known as
A) accion publiciana. C) equity of redemption.
B) pacto de retro. D) right of redemption.

50. If today the husband alone, without the prior consent or authority of the wife enters into a contract of chattel mortgage involving
conjugal property, said contract is:
A) Null and void C) Valid only as to one half and void as to the other half.
B) Valid D) Voidable

51. Spouses Yolly and Wally are conjugal owners of house and lot. Wally, without the knowledge or consent of Yolly mortgaged the
house and lot to PNB to secure the loan of Chito. The mortgage is:
A) Void. C) Valid
B) Voidable D) Unenforceable

52. Is it possible to pledge future properties?

A) Yes, so long as the pledgee accepts the pledge.
B) Yes, jurisprudence allows the pledge of future properties.
C) No. The pledgor must be the absolute owner of the thing pledged.
D) No. The thing pledge must be capable of being delivered.

53. S, minor of 16 years, sold her bracelet to B for P8,000.00. Later on, B, needing money to pay her daughter’s tuition fee and
personal needs, borrowed P15,000.00 from C, and as a security, pledged the bracelet to the latter. B failed to pay C resulting in the
auction sale of the bracelet in favor of P for P10,000.00. Which of the following statements is correct?

A) The title of B over the bracelet is not valid, hence the pledge, as well as the sale of said bracelet is likewise defective. The
pledgor must be the owner of the thing pledged.
B) The deficiency of P5,000.00 may still be recovered by C from B if there is a stipulation to this effect.
C) C can no longer recover the deficiency of P5,000.00 from B. The pledge together with the sale is valid. The voidable title
of B is valid because it is not annulled.

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 D) If P was a purchaser in bad faith as he knew of the defective title of B over the bracelet from S, ownership will not pass to
him (P).

54. The following may be the object of pledge, except:

A) all movables within the commerce of man which are susceptible of possession.
B) bills of lading
C) shares of stock
D) parcels of land

55. In the preceding number, assuming that what was executed by B in favor of C was a valid chattel mortgage which was eventually
foreclosed and the bracelet was sold to P at the public auction for the same amount, which statement is correct?
A) The title of B over the bracelet is not valid, hence the chattel mortgage, as well as the sale of said bracelet is likewise
defective. The mortgage must be the owner of the thing pledged.
B) The deficiency of P5,000.00 may still be recovered by C from B.
C) C can no longer recover the deficiency of P5,000.00 from B as the mortgage, together with the foreclosure sale, was valid.
The title of B was still valid.
D) If P was a purchaser in bad faith as he knew of the defective title of B over the bracelet, ownership will not pass to him (P).

56. D pledged his diamond ring and gold watch to C to secure a debt of P10,000.00
A) If D defaults and the ring and watch are sold at public auction, C may recover any deficiency if the proceeds of sale amount
to less than P10,000.00.
B) If D defaults, C may automatically appropriate for himself the ring and the watch.
C) If D pays C P5,000.00, D may demand either the return of the ring or the watch.
D) If C renounces the pledge in writing, the pledge is extinguished although C continues to possess the ring and the watch.

57. Alpine Corp. obtained a loan amounting to P1,000,000.00 from Eastern Bank. To secure the obligation, P, the president of Alpine,
mortgaged his own building in favor of the bank. The contract of loan and deed of mortgage have been signed by parties but have not
been acknowledged before a notary public.
A) Alpine Corp. and P are one and the same person.
B) P may validly mortgage his own property to secure the obligation of Alpine to the bank.
C) The mortgage is not yet binding between the parties since it has not been notarized.
D) The mortgage contract can stand independently from the contract of loan.

58. What should the guarantor do in order that he can resort to the benefit of excussion?
A) He must point out to the creditor available property of the creditor in the Philippines.
B) He must set it up against the creditor upon the latter's demand for payment from him.
C) He must renounce all claims against the debtor.
D) He must point out to the insolvency of the principal debtor.

59. The borrower in mutuum can use the thing loaned without incurring any criminal liability for estafa, conversion or misappropriation
because: A) A loan maybe paid in kind.
B) He is obligated to pay the thing loaned.
C) Ownership is transferred to the borrower.
D) No person shall be imprisoned for non-payment of debt.

60. A contract where a thing is delivered to another for safekeeping with the obligation of returning upon demand is a:
A)Voluntary deposit C) Involuntary deposit
B) Necessary deposit D) Judicial deposit.

61. Can the depositary deposit the thing with a third person?
A) No, unless there is a stipulation to the contrary.
B) No, because deposit is founded on trust and confidence.
C) No., because deposit is purely personal.
D) Yes, because of the prerogative provided for by law to the depositary.

62. A and B deposited with C P1,000.00 without stating what amount belongs to each. How much can A claim from C?
A) P500.00 C) P1,000.00
B) None D) It depends on the stipulation of A and B

63. A borrowed B's truck. During a fire which broke out in A's garage, he had time to save only one vehicle and he saved his car instead
of the truck. Is A liable for the loss of the truck?
A) Yes. The bailee is liable for the loss of the thing borrowed in his custody.
B) Yes. The truck is under his responsibility as a depositary.
C) Yes. Being able to save the thing borrowed, A chose to save his car instead. (Art. 1942 [5])
D) No. The loss was due to a fortuitous event.

64. One of the distinctions between pledge and mortgage is that pledge:
A) is constituted to secure the fulfillment of a principal obligation.
B) requires absolute ownership on the part of the person constituting the security.
C) requires that the one constituting the security must have the free disposal of the thing or be legally authorized for the said
purpose.
D) requires the actual delivery of the thing given as security to the creditor or a third person by common agreement.

65. In order to bind third persons, a pledge:

A) must be recorded with the Register of Deeds.
B) must be in a public instrument showing a description of the thing pledge and the date of the pledge.
C) is sufficient that it be in a private instrument showing a description of the thing pledged and the date of the pledge.
D) must be accompanied by an affidavit of good faith.

66. The following is required in order that a chattel mortgage will bind third persons.
A) The chattel mortgage must be accompanied by an affidavit of good faith and recorded in the Chattel Mortgage Register.

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 B) The chattel mortgage must be in a public instrument showing a description of the thing mortgaged and the date of the
chattel mortgage.
C) It is sufficient that the chattel mortgage be in writing, public or private.
D) The thing mortgaged must be delivered to the creditor.

67. The following is required in order that a real estate mortgage will bind third persons.
A) The real mortgage must be accompanied by an affidavit of good faith and recorded with the Registry of Property.
B) The real mortgage must be in a public instrument showing a description of the thing mortgaged
C) It is sufficient that the real mortgage be in writing, public or private.
D) The real mortgage must be recorded in the Registry of Property.

68. When is appropriation by the creditor of the thing given as security allowed in pledge, real mortgage and chattel mortgage?
A) When the thing given as security in real mortgage is not sold at two public auctions.
B) When the thing given as security in pledge is not sold at two public auctions.
C) When the thing given as security in chattel mortgage is not sold at one public auction.
D) No appropriation is allowed in either pledge, real mortgage or chattel mortgage.

69. This is a stipulation in pledge or mortgage providing that the ownership of the thing given as security will pass to the pledgee or
mortgagee upon default of the debtor. A) Constitutum possessorium C) Legal subrogation
B) Pactum commisorium D) Redemption

70. D borrowed P300,000.00 from C. To secure the debt, D pledged his ring, wristwatch, and necklace. Before the debt could be paid,
C died leaving X, Y and Z as heirs. By agreement among the heirs who inherited the credit, the ring would secure the share of X of the
credit, the wristwatch the share of Y, and the necklace the share of Z. Later, D pays X 10,000.00.
A) D can demand the extinguishment of the pledge of the ring.
B) X may release the pledge of the ring.
C) The pledge of the ring will remain until the shares of Y and Z are paid by D.
D) D can demand the extinguishment of the pledge of the ring, wristwatch and necklace because there has been partial
payment.

71. The following may be the object of pledge, except:

A) all movables within the commerce of man which are susceptible of possession.
B) bills of lading
C) shares of stock
D) parcels of land

72. A kind of mortgage which lacks the formalities required by law but nevertheless shows the intention of the parties to secure a debt
with real property is known as: A) conventional mortgage C) equitable mortgage
B) voluntary mortgage D) legal mortgage

73. The debtor/pledgor has the following rights, except to:

A) ask for the return of the thing pledged after he has paid the debt, its interests, and with expenses in a proper case.
B) continue to be the owner of the thing pledged unless it is expropriated.
C) require the deposit of the thing with a third person if it is in danger of being impaired through the negligence or willful
act of the pledgee.
D) alienate the thing pledged without the consent of the pledgee.

74. The creditor/pledgee has the following rights, except to:

A) retain the thing in his possession until the debt is paid.
B) use the thing pledged even without the authority if such use is necessary for its preservation.
C) demand reimbursement of the expenses made for the preservation of the thing.
D) automatically appropriate the thing pledged upon default of the debtor in the payment of his debt.

75. On March 1, 2013, D obtained a loan of P10,000.00 from C. To secure the debt which is payable on May 1, 2013, D pledged a
promissory note amounting to P12,000.00 which was executed in his favor by M. The promissory note is due April 25, 2013 and
properly endorsed by D to C.
A) On April 25, 2013, C can collect the note of P12,000.00 from M. The entire proceeds will belong to C.
B) On April 25, 2013, C can collect the note of P12, 000.00 from M. However, he must give P2,000.00 to D.
C) C cannot not collect from M. D is the one entitled to collect the note from M.
D) C cannot collect from M. He must sell the note at public auction at maturity if D cannot pay.

76. A third person who pledges his property to secure another person’s debt is released from liability in the following cases:
A) when the creditor voluntarily accepts an immovable property in payment of debt.
B) when the creditor voluntarily accepts a movable property in payment of the debt.
C) if an extension of time is granted to the debtor by the creditor with the pledgor’s consent.
D) if through some acts of the creditor, the pledgee cannot be subrogated to the rights, mortgages and preferences of the
creditor.

77. A pledge is extinguished through any of the following, except:

A) sale of the thing pledged
B) appropriation of the thing pledged after the thing is not sold at one public auction
C) written abandonment of the pledge in writing
D) return of the thing pledged

78. D pledged his 100 shares of stock of San Miguel Corp. to C to secure his debt of P5,000.00. On due date, D was not able to pay the
debt, so C caused the sale of the shares at public auction. The shares of stock were sold at P4,500.00.
A) To extinguish the obligation, C may recover the deficiency of P500.00.00 from D if there is a stipulation to that effect.
B) To extinguish the obligation, C may recover the deficiency if there is no stipulation to that effect.
C) The obligation is extinguished even if there is a deficiency of P500.00. Accordingly, C can no longer recover the deficiency.
D) The obligation is extinguished only if the proceeds of sale amount to P5,000.00.

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79. This refers to the right of a person to retain the thing until he receives payment of his claim in the cases provided by law such as
one who has executed work on a movable. A) conventional pledge C) legal pledge
B) voluntary pledge D) chattel mortgage

80. D borrowed P100,000.00 from C. To secure the debt, D mortgaged his land and building in favor of C. The mortgage is registered
with the Registry of Property. Sometime later, D sold the land and building to X who was not aware of the mortgage of the land and
building. Based on the above information, which of the following is false?
A) X must respect the mortgage although he was not a party thereto.
B) X was not bound by the mortgage because he was not aware of it.
C) If C forecloses the mortgage and the proceeds of the foreclosure sale are not enough to pay the debt, C can recover the
deficiency from D.
D) If C forecloses the mortgage and the proceeds of the foreclosure sale exceed the amount of debt, D is entitled to the
excess.

81. It is the right of the mortgagor to redeem the property that was mortgaged after it was sold.
A) Equity of redemption C) Right of subrogation
B) Right of redemption D) Right of pre-emption

82. D borrowed P50,000.00 from C. The obligation bears interest of 10% per annum. To secure the debt, D agreed with C that the fruits
from the agricultural lot of D shall answer for the interest and the principal obligation. Assuming the form required by law was complied
with, the contract entered into between D and C for the application of the fruits of the lot to the interest and principal is known as:
A) antichresis C) real estate mortgage
B) pledge D) chattel mortgage

83. The following are characteristics of a chattel mortgage, except:

A) the mortgage must be the absolute owner of the property mortgaged.
B) it is an accessory contract.
C) it involves movable or immovable property.
D) the deed of chattel mortgage must be accompanied by an affidavit of good faith to be binding against third persons.

84. The following elements are common in both pledge and mortgage, except:
A) the contract is constituted to secure the fulfillment of a principal obligation.
B) the property on which the security is constituted must be delivered to the creditor.
C) the debtor must be the absolute owner of the property pledged or mortgaged.
D) the debtor must have the free disposal of the property pledged or mortgaged.

85. D borrowed P100,000.00 from C. The loan is secured by a mortgage of T’s lot. On due date, D was unable to pay. Accordingly, C
foreclosed the mortgage on the lot and during the public auction, the lot was sold for P90,000.00
A) C can recover the deficiency from D. C) C can recover the deficiency from both D and T.
B) C can recover the deficiency from T. D) C can no longer recover the deficiency.

86. Pledge and real mortgage are similar in what respect?

A) The object of the contract. C) Recovery of deficiency.
B) Binding effect against third persons. D) The fact that third persons may pledge or mortgage their property to secure
another person’s debt.

87. D obtained an interest-bearing loan of P100,000.00 from ABC Bank that is secured by a mortgage of a building owned by D. As an
added requirement of the loan, a fire insurance on the building was also obtained by D with ABC Bank as beneficiary. Before the due
date of the loan, the building was razed by fire.
A) The loan of P100,000.00 is extinguished but the security remains.
B) Only the security for the obligation is extinguished.
C) The proceeds of the insurance policy will be the new security of the loan obligation which will subsist.
D) Both the loan and the mortgage security are extinguished.

88. As a general rule, any deficiency in the foreclosure sale may be recovered in the following contracts, except in:
A) chattel mortgage C) conventional pledge
B) real mortgage D) antichresis

89. As a general rule, in case of excess of the proceeds of the foreclosure sale over the creditor’s claim, the excess shall belong to the
creditor in: A) chattel mortgage C) conventional pledge
B) real mortgage D) antichresis

90. Recording in the Registry of Property in the appropriate book is required for the validity of the contract of:
A) chattel mortgage C) conventional pledge
B) real mortgage D) antichresis

91. Asiong borrowed P1 million from a bank, secured by a mortgage on his land. Without his consent, his friend Boyong paid the whole
loan. Since Asiong benefited from the payment, can Boyong compel the bank to subrogate him in its right as mortgagee of Asiong's
land? A) No, but the bank can foreclose and pay Boyong back.
B) No, since Boyong paid for Asiong’s loan without his approval.
C) Yes, since a change of creditor took place by novation with the bank’s consent.
D) Yes, since it is but right that Boyong be able to get back his money and, if not, to foreclose the mortgage in the
manner of the bank.

92. What should the guarantor do in order that he can resort to the benefit of excussion?
A) He must point out to the creditor available property of the creditor in the Philippines.
B) He must set it up against the creditor upon the latter's demand for payment from him.
C) He must renounce all claims against the debtor.
D) He must point out to the insolvency of the principal debtor.

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93. Arman delivered to Bobby a truck by way of commodatum, which has defective brakes. Arman did not inform Bobby about it. While
being driven downhill from Antipolo, its brakes malfunctioned causing Bobby to hit an electric post causing injuries to him. Is Arman
liable?
A) YES. As owner of the truck, it is the responsibility of Arman to fully disclose its condition to Bobby.
B) NO. Because the contract of commodatum is gratuitous.
C) NO. It is presumed that the truck is in good order and condition. Bobby should have inspected the truck as well.
A) YES. Arman, knowing the flaws of the truck should have advised Bobby. Arman shall be liable to the latter for the damages
which he may suffer by reason thereof.

94. MIMI borrows a 2017 Toyota Vios from TIMI. But, TIMI forgets to tell MIMI that the car has a tendency to overheat after 10 minutes.
So MIMI drives, and after 10 minutes, the car stalls and overheats. MIMI opens the hood and sees lots of steam. She opens the
radiator cap to put water inside. Radiator water scalds her face, and she suffers from burns. Can she claim damages from TIMI?
A) NO. The defect is not hidden and MIMI borrowed the car without inspecting the same.
B) NO. It was MIMI’s fault. She was not careful in opening the radiator cap that caused her injury.
C) NO. The car is relatively new and the defect is minor.
D) YES. TIMI failed to notify MIMI of the defective nature of the car which is deemed a hidden defect.

95. In the same problem in No. 94, can MIMI keep the car as security until the injury she suffered will be paid?
A) NO. There is no valid basis for MIMI to keep the car.
B) NO. The liability for the injury suffered by MIMI is not a justification to keep the car as a security.
C) NO. TIMI is not liable for the injury caused to MIMI.
D) YES. The borrower has the right of retention of the thing loaned to secure the payment of the liabilities of the lender for the
injury caused by the hidden defects of the thing loaned.

96. UNO left a pit bull with his neighbor DOS, while UNO went on vacation in Boracay. TRES was bitten by the dog. Can TRES sue
UNO for damages?
A) YES. The owner of the thing deposited is responsible for any injury caused by the thing deposited.
B) NO. UNO was on vacation and cannot be expected to prevent the dog from biting TRES.
C) NO. TRES was not careful in avoiding the dog, specially that it is a dangerous animal.
D) NO. It is DOS who should be liable who took the risk of safekeeping the dog which is of dangerous character.

97. If a guaranty is entered into without the knowledge or consent, or against the will of the principal debtor, the gurantor, if he pays the
creditor:
A) is entitled to recover the amount of payment that was beneficial to the debtor.
B) is entitled to be subrogated in the creditor’s rights.
C) is entitled to both A and B
D) cannot recover any amount from the principal debtor

98. If the depositary is incapacitated, which of the following is the remedy of the depositor?
A) To recover the thing deposited while it is still in the possession of the depositary.
B) To compel the depository to pay him the amount by which the latter may have enriched or benefited himself with the thig or
its price.
C) If the thing has been acquired by third person in bad faith, to bring an action against the latter to recover the thing.
D) A, B or C, alternatively

99. In case of temporary use by the bailee of the thing loaned in commodatum, the contract of commodatum:
A) is suspended while the thing is in the possession of the bailor
B) continues notwithstanding that the thing is in the possession of the bailor
C) is replaced by another contract
D) will co-exist with another contract, while the thing loaned is in possession of the bailor

100. A stipulation that the bailor may make use of the thing loaned in commodatum is:
A) valid C) voidable
B) void D) unenforceable

101. What is the consideration in commodatum? A) None. Commodatum is essentially gratuitous.

B) The rendering of some service.
C) The use of the fruit of the thing loaned.
D) The use or possession of the thing loaned.

102. The bailor cannot demand for the return of the thing loaned till after the termination or accomplishment of the commodatum,
except: A) If the bailee commits some offense against the children of the bailor.
B) In case of temporary use by the bailor.
C) When the debtor fully paid the obligation.
D) In case of urgent need of the thing.

103. The death of either the bailor or bailee extinguishes commodatum because of its nature and character as:
A) real contract C) purely personal
B) similar to donation D) essentially gratuitous
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