Pledge.docx

ecuring PLEDGE (ARTICLES 2085-2123)

the fulfillment of a principal obligation with t he understanding that when the obligation is fulfilled,

PROVISIONS COMMON TO PLEDGE AND MORTGAGE

the

Art. 2085. The following requisites are essential t

thing delivered shall be returned with all its fruit

o the contracts of pledge and mortgage:

s and accessions KINDS OF PLEDGE

(1) That they be constituted to secure the fulfillment of a principal obligation;

1. Voluntary or conventional 2. Legal

(2) That the pledgor or mortgagor be the absolut

REQUISITES TO A CONTRACT OF PLEDGE

e owner of the thing pledged or mortgaged; 1. It be constituted to secure the fulfillment of a (3) That the persons constituting the pledge o

principal obligation

r

2. The pledgor be the absolute owner of the thing

mortgage have the free disposal of their property,

pledged

and in the absence thereof, that they be legally

3. That the persons constituting the pledge have

authorized for the purpose.

the free disposal of the property and in the absence there

Third persons who are not parties to the principal

of, that they be legally authorized for the purpose

obligation may secure the latter by pledging or

4. The pledge is perfected by the delivery of the

mortgaging their own property. (1857)

thing pledged 5. When the principal obligation becomes due, th

Art. 2086. The provisions of Article 2052 are

e things,

applicable to a pledge or mortgage. (n)

which the pledge consists, may be alienated for t he payment of the creditor.

Art. 2087. It is also of the essence of these contracts

CHARACTERISTICS OF A CONTRACT OF PLEDGE

that when the principal obligation becomes due, the th

1. Real contract—

ings in which the pledge or mortgage consists may

perfected by the delivery of the things

be alienated for the payment to the creditor. (1858)

pledged by the debtor who is called the pledgor t o the creditor who is called by the pledgee, or to a

PLEDGE >

Contract by virtue of which the debtor deliver

third person by common agreement 2. Accessory contract

s to the

3. Unilateral contract

creditor or to a third person a movable, or docu

4. Subsidiary contract

ment evidencing incorporeal rights, for the purpose of s

WHAT IS THE CAUSE OR CONSIDERATION IN PLEDGE?

>

Pledge is an accessory contract

>

Its cause is the principal obligation

CONSTITUTED TO SECURE THE FULFILLMENT OF THE PRINCIPAL OBLIGATION

PLEDGOR OR MORTGAGOR MAY BE A THIRD PERSON 1. Accommodation pledge or mortgage 2. Duty of mortgagee to make proper inquiry 3. Where mortgage is gratuitous— same should be strictly construed

CONSTITUTED BY THE ABSOLUTE OWNER

4. Liability for deficiency—pledgor not liable for any

1. Future property cannot be the subject of a pled ge or mortgage 2. A pledge or mortgage executed by one who is n ot the owner of the property pledged or mortgaged is wit hout legal existence and registration cannot validate it 3. Share in a co-ownership— shall be limited to the portion which may be alienated by him in the division upon the termination of the co-ownership

deficiency should the property be not sufficient to

What is the absolute owner? It means unencumbered property. The absolute owner has legal and beneficial ownership. In the earlier example, P is the legal owner and S is the beneficial owner. This being the case, neither of them can pledge the property.

2. The creditor cannot appropriate himself without

cover the debt RIGHT OF CREDITOR WHERE DEBTOR FAILS TO COMPLY WITH HIS OBLIGATION IN PLEDGE 1. If the debtor fails to comply with the obligation at the time it falls due, the creditor is merely entitled to move for the sale of thing pledged

foreclosure the thing pledged as pledge or under mortgage nor can he dispose of the same as owner

WHAT IS THE DIFFERENCE BETWEEN FREE DISPO SAL AND CAPACITY TO DISPOSE? >

FREE DISPOSAL OF THE PROPERTY—property

PACTUM COMMISSORIUM

must not be subject to any claim of a third person >

CAPACITY TO DISPOSE—

pledgor or mortgagor has the capacity or authority

>

to make a disposition of the property

Automatic appropriation by the creditor of the thi ng pledged or mortgaged upon the failure of the debtor to pay the principal obligation

THING PLEDGED OR MORTGAGED MAY BE ALIENATED >

Necessarily implied as an inherent element

of the transaction of the mortgage or pledge >

The only remedy for the pledgee is to have t

he security given sold at public auction and the proceeds of the sale be applied to the payment of the obligation secured by the mortgage or pledge

> TEST IF THERE IS EXISTS PACTUM COMMISSORIU M is whether or not there is no need for extra step to be taken by creditor

PROHIBITION AGAINST PACTUM COMMISSORIUM 1. Stipulation is null and void— it is said to be contrary to good morals and public policy

PLEDGE OR MORTGAGE INDIVISIBLE, EXCEPTIONS Art. 2089. A pledge or mortgage is indivisible, even though the debt may be divided among the successors in interest of the debtor or of the creditor.

2. Requisites a. There should be a pledge, mortgage, antichresis of property by way of security for the payment of the principal obligation b. Stipulation for the automatic appropriation of t he property in favor of the creditor upon default of the debtor/pledgor 3. Effect on the security contract—doesn’t affect substantially the principal contract of pledge, mortgage or antic hresis with regard to its validity and efficacy

Therefore, the debtor’s heir who has paid a part of the debt cannot ask for the proportionate extinguishme nt of the pledge or mortgage as long as the debt is not completely satisfied. Neither can the creditor’s heir who received his share of the debt return the pledge or cancel the mortgage, to the prejudice of the other heirs who have not been paid.

AGREEMENTS THAT WOULD NOT CONSTITUTE PACTUM COMMISSORIUM 1. Attorney in fact 2. Option contract. There would be another contract. There is a risk of the courts to look at it as a PC.

From these provisions is expected the case in which, there being several things given in mortgage or pledge, each one of them guarantees only a determinate portion of the credit.

title and pledgor would still have beneficial

The debtor, in this case, shall have a righ t to the extinguishment of the pledge or mortgage as the portion of the debt for which each thing is specially ans

ownership.

werable is satisfied. (1860)

3. Dacion en pago 4. Assigned shares. Creditor would only have legal

RISK OF LOSS OF PROPERTY PLEDGED OR MORTGAGED

Art. 2090. The indivisibility of a pledge or mortgage is not affected by the fact that the debtors are not s olidarily liable. (n)

> Debtor-owner bears the loss of the property > The principal obligation is not extinguished upon the loss of the thing pledged or mortgaged

PLEDGE OR MORTGAGE INDIVISIBLE

> Rule applies even if the obligation is joint and not solidary > The divisibility of the principal obligation doesn't affect the indivisibility of the mortgage or pledge

EXCEPTIONS TO THE RULE OF INDIVISIBILITY 1. Where each one of several things guarantees determinate portions of credit 2. Where only a portion of the loan was released 3. Where there was failure of consideration 4. Where there is no debtor-creditor relationship

FORECLOSURE OF MORTGAGE CO NSTITUTED ON SEVERAL PROPERTIES > A mortgage even constituted on several properties is one and indivisible, that is, it cannot be divided a mong the several properties and the mortgagee has the right to have the properties either or both, jointly or singly , sold to satisfy his claim > Further, the sale of the mortgaged properties cannot be set aside in the absence of evidence to show that a better price could have been obtained if they we re sold separately, or the sale of one or some alone would bring sufficient proceeds to satisfy the mortgage credit