Felipe, Glaisen Pearl M.

BSACCT 2A

Accounting 194 ( Quiz)

1.1. The concept of mortgage in possession refers to the legal situation where the mortgagee takes
control and possession of the property mortgaged. As per the civil code, it implicitly acknowledges
the possibility of the mortgagee taking possession under specific terms wherein, this action
empowers the mortgagee to manage the property, collect income, and preserve its value. The
mortgagee’s possession, however, is not absolute ownership and carries with it the responsibility to
act prudently and take good care of the thing like of a good father of a family.

1.2 A dragnet clause which is also known as blanket mortgage clause or the continuing agreement
clause, is a provision that states that the mortgage secures not only the specific loan for which it
was initially executed but also all other debts that the mortgagor may subsequently incur with the
same mortgagee. It essentially drags in or covers all present and future obligations of the borrower
under the security of the existing mortgage.

2. The affidavit in good faith is an oath in a contract of chattel mortgage wherein the parties
severally swear that the mortgage is made for the purpose of securing the obligations specified in
the conditions thereof and for no other purposes and that the same is a just and valid obligation and
one not entered for the purpose of fraud. This often requires to accompany certain actions or filings,
serving as a sworn declaration by a party attesting to the truthfulness and validity of the procedures
undertaken. The chattel mortgage law includes the requirement of an affidavit of good faith
appended to the mortgage and recorded therein. However, the absence of the affidavit vitiates a
mortgage only as against third person but still be valid and binding against the parties.

3. a. No, X may not demand the deficiency from Y. This statement is supported by Article 2115,
which states that if the price of the sale is less, neither shall the creditor be entitled to recover the
deficiency, notwithstanding any stipulation to the contrary, which means that in a contract of pledge,
the sale of the pledged item fully satisfies the debt, even if the proceeds are less than the total
amount due. This concept allows the creditor to have an honest sale, and not to defraud the debtor
by opting to sold the thing in lesser value and demand such deficiency, in which a stipulation to the
contrary is void. Therefore, the creditor will bear the risk of any deficiency.

b. B. Yes, in a conventional pledge, the creditor (X) is generally entitled to any excess from the
sale of the pledged item. Article 2115 of the Civil Code establishes that the debtor is not entitled to
this excess unless there is a specific agreement stating otherwise. Since the provided statement
doesn't mention any such agreement, the default rule applies, favoring the creditor. This principle is
consistent with the understanding that the creditor, who bears the risk of deficiency (without
recourse against the debtor), should also benefit from any surplus.

c. Yes. In contrast to a pledge, if the rings were mortgaged to X, he would have the right to claim
the deficiency from Y should the sale proceeds fall short of the debt. Conversely, any surplus from
the sale would belong to Y, not X. This is because a mortgage does not operate as a full
extinguishment of the debt upon the sale of the mortgaged property. Specifically, in a chattel
mortgage, the debtor remains liable for any deficiency, while any excess in the sale proceeds
belongs to the debtor, unless there's a specific stipulation to the contrary.

4. a. When representing X, the primary argument to defeat the foreclosure in the after acquired
property would be centered on the fundamental principle of mortgage law requiring the mortgagor
to be the absolute owner of the property at the time the mortgage is constituted, as stipulated in
Article 2085, contending that since X did not own the goods, stock in trade, furniture, and fixtures
acquired subsequent to the chattel mortgage’s execution.

b. In this case, the claim of the creditor to foreclose the chattel mortgage on the after acquired
stock in trade is valid and binding, and which strongly supports by the intent behind the rule on
replenishment in the context of a business with constantly changing inventory as a security. A
mortgage may be made to include future acquisitions of goods to be added to the original stock
mortgage, in this case it expressly provides that such future acquisition are included in and covered
by the mortgage. Thus, the mortgage covers all after acquired property of all classes mentioned.

5. a. No. For a real estate mortgage used as collateral for a loan to be valid between the parties,
registration in the Registry of Property is not strictly necessary. The mortgage contract is binding
and valid upon its execution by the mortgagor and the mortgagee, as it is consensual in nature.
However, under Article 2125, registration in the Registry of Property is absolutely essential for the
mortgage to be binding against third persons. Without registration, subsequent purchasers, other
creditors, or any third party who acquired rights over the same real property in good faith and for
value not be bound by the unregistered mortgage, and the mortgagee’s lien would not be effective
against their interests.

b. Yes. In case of chattel mortgage used as collateral for a loan to be valid between the mortgagor
and the mortgagee, registration in the Chattel Mortgage Register is required by law. As supported
by Article 1508, a chattel mortgage shall not be valid against any person except the mortgagor,
unless it is recorded in the office of the register of deeds of the province in which the mortgagor
resides and where the property is situated. Article 2140 also stated that when a movable property is
not registered and delivered to the creditor or a third person, the contract is a pledge and not a
chattel mortgage. These provisions clearly indicates that registration is a condition for the validity
of the chattel mortgage.

c. In judicial foreclosure of real estate mortgages, mortgagors does not possess right of
redemption, but only the right of equity of redemption, exercisable within 90 to 120 days from
judgment entry or even after foreclosure sale but before court confirmation, as outlined in Rule 68.
Conversely, extrajudicial foreclosure under Act 3135 grants a statutory right of redemption within
one year from the certificate of sale's registration. However, chattel mortgage foreclosure offers no
such post-sale redemption right; ownership typically transfers irrevocably upon the chattel's sale at
public auction.
d. Based on the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 (Republic Act No.
10142), the list of steps/procedures for Voluntary Rehabilitation as outlined in the provided text
aligns with the general process.
Here are the steps for Voluntary Rehabilitation under FRIA 2010 in bullet points:
* The debtor files a petition with the court to initiate voluntary rehabilitation
proceedings due to foreseen inability to pay debts.
* The court issues a Commencement Order, appointing a rehabilitation receiver and
imposing a stay on claims.
* The rehabilitation receiver determines the claims of creditors within twenty days of
assumption.
* The rehabilitation receiver formulates a Rehabilitation Plan in consultation with the
debtor and creditors, requiring creditor approval.
* The approved Rehabilitation Plan is submitted to the court, and creditors can file
objections.
* The court evaluates the plan and objections, potentially issuing a Confirmation Order
within approximately one year.
* Successful implementation of the plan leads to the termination of proceedings and
debtor discharge; failure may lead to liquidation.

6. The foreclosure was extrajudicial, and the right to redeem properties sold under such
proceedings is governed by Act No. 3135. The certificates of sale were registered on July 28, 2019,
and both Primetime Corporation, and Mr. Timbol sought to redeem their respective properties on
May 16, 2020, which falls within one year from the registration date. Consequently, Mr. Timbol's
attempt to redeem his property was well within the statutory one-year period provided by Act No.
3135, rendering the bank's refusal baseless. However, the situation for Primetime Corporation, a
juridical person whose property was foreclosed by a bank, is subject to the provisions of the
General Banking Law, which typically provides a shorter redemption period, often three months,
after foreclosure. Therefore, while Mr. Timbol retains his right to redeem, Primetime Corporation's
redemption period may have already lapsed by May 16, 2020, depending on the specific provisions
of the General Banking Law applicable at the time of foreclosure.