RFBT03-07 - Law On Pledge, Mortgage and Antichresis

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com
REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS
Law on Pledge, Mortgage and Antichresis
1. Essential requisites of the contracts of pledge, real estate mortgage and chattel
mortgage
a. That they be constituted to secure the fulfillment of a principal obligation or

contract of loan.
i. Kinds of principal obligations that may be secured by a pledge or
mortgage
1. Pure obligation
2. Obligation with a suspensive period or resolutory period
3. Conditional obligations whether the condition is suspensive or resolutory
4. Natural obligations
5. Rescissible obligations
6. Voidable obligations
7. Unenforceable obligations
ii. Principal obligations that may not be secured by a pledge or mortgage
1. Void obligations
b. That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged even if the pledgor or mortgagor is not the principal debtor.
i. Period the pledgor or mortgagor required to be the owner of the thing
pledged or mortgaged for the validity of contract of pledge or
mortgage
1. At the time the contract of pledge or mortgage is constituted or
perfected
c. That the persons constituting the pledge or mortgage have the free disposal of
their property, and in the absence thereof, that they be legally authorized for
the purpose.
d. That when the principal obligation becomes due, the things in which the
pledge or mortgage consists may be alienated for the payment of the creditor.
i. Pactum Commissorium is a stipulation whereby the thing pledged or
mortgaged shall automatically become the property of the creditor in the event
of non-payment of the secured debt within the term fixed. This stipulation is null
and void for being contrary to law and public policy. However, the contract of
loan and contract of pledge or mortgage remain to be valid.
ii. Dacion en Pago is a special mode of payment whereby the debtor voluntarily
delivers and transfers the ownership of a noncash asset, either collateral or not,
in full satisfaction of a debt in money at the time of its maturity date.
2. The following are the instances where the thing pledged or mortgaged may be sold or
alienated in public auction for the payment of the secured contract of loan or
principal obligations
a. If the pledgor or mortgagor fails to fulfill certain conditions and such violation would
make the debt due and demandable.
b. If the debtor has lost the right to make use of the period or where there is an
acceleration clause in the payment of installment.
c. Upon default to pay the obligation at maturity.
1|P a g e RLACO/DSALES/NVALDERRAM A
No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
3. Indivisibility of contract of pledge or mortgage or antichresis - The contract of pledge or

mortgage is indivisible whether the secured contract of loan is joint or solidary. Thus, the secured
contract of loan must be fully paid before any of the thing pledged or mortgaged may be
released as security. The indivisibility of a pledge or mortgage is not affected by the fact that the
debtors are not solidarily liable. 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. Therefore, the
debtor's heir who has paid a part of the debt cannot ask for the proportionate extinguishment 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. From these provisions is excepted 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. The debtor, in this case, shall have a right to the
extinguishment of the pledge or mortgage as the portion of the debt for which each thing is
specially answerable is satisfied.
4. Contract of pledge is a contract by virtue of which the debtor delivers to the creditor or to a
third person a movable, or instrument evidencing incorporeal rights for the purpose of securing
the fulfillment of a principal obligation with the understanding that when the obligation is fulfilled,
the thing delivered shall be returned with all its fruits and accessions.
5. Contracting parties in contract of pledge

a. Pledgor refers to the party who delivered and pledged his movable or personal property
to secure the payment of the principal contract of loan. The pledgor may be the principal
debtor or third person.
b. Pledgee refers to the party who received the pledged movable or personal property
which serves as the security for the payment of his loan receivable.
6. Characteristics of a contract of pledge
a. Real – It is perfected by delivery of the subject matter.

b. Accessory – It has no independent existence of its own.
c. Unilaterial – It creates an obligation on the part of the creditor to return the thing upon
the fulfillment of the principal obligation.
d. Subsidiary – The obligation incurred does not arise until the fulfillment of the principal
obligation which is secured.
e. Indivisible – It creates a lien on the whole or all of the properties pledged, which lien
continues until the obligation is secures has been fully paid.
f. Nominate – It has a name given to it by law.
7. Essential requisites of conventional pledge or contract of pledge
a. That it be constituted to secure the fulfillment of a principal obligation or contract of

loan.
b. That the pledgor be the absolute owner of the thing pledged.
c. That person constituting the pledge has the free disposal of his property, and in the
absence thereof, that he be legally authorized for the purpose.
d. That the thing pledged be placed in the possession of the creditor, or a third person by
common agreement.
8. Subject matter of a contract of pledge
a. All movable or personal property susceptible of possession.

b. Incorporeal rights or intangible assets which are evidenced by negotiable instruments,
bill of lading, shares of stocks, bonds, warehouse receipts and similar documents.
9. Form of contract of pledge for validity or to bind contracting parties vs. form of
contract of pledge to bind third persons - Contract of pledge may be in any form for its
validity to bind contracting parties because it is a real contract perfected by the delivery of the
thing pledged but it must be notarized with the description of the thing pledged and its date
stated in the notarized contract in order to bind third persons.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
10. Nature of a contract to constitute a pledge vs. nature of contract of pledge - Contract
to constitute a pledge is a consensual contract perfected by mere consent while contract of
pledge is a real contract perfected by the delivery of the thing pledged.
11. Rights of the debtor-pledgor
a. To alienate, but it must be with the consent of the pledgee, the thing pledged but the
thing pledged will still be subject to the contract of pledge.
b. To continue to be the owner of the thing pledged unless it is expropriated or sold in
public auction after default by the principal debtor.
c. To ask for the return of the thing pledged after he has paid the debt and its interest, with
expenses in a proper case.
d. To ask that the thing pledged be judicially or extra-judicially deposited if it is used
without authority or for purposes other than for its preservation.
e. To require that the thing be deposited with a third person if it is in danger of being lost
or impaired through the negligence or willful act of the pledgee.
f. To demand the return of the thing pledged, upon offering another thing in pledge,
provided the latter is of the same kind and quality, if there are reasonable grounds to
fear the destruction or impairment of the thing pledged without the fault of the pledgee.
This right is without prejudice to the right of the pledgee to have the thing sold at a
public sale. However, the pledgee is bound to advise the pledgor, without delay, of any
danger to the thing pledged.
g. In case of a pledge of animals, their offspring shall pertain to the pledgor or owner of
animals pledged, but shall be subject to the pledge, if there is no stipulation to the
contrary.
12. Obligations of the debtor-pledgor
a. To pay the debt and its interest, with expenses, in a property case, when they are due if
the pledgor is also the debtor.
b. To pay damages that the pledgee may suffer by reason of the flaws of the thing pledged,
if he was aware of such flaws but did not advise the pledgee of the same.
c. To pay for the expenses which are necessary for the preservation of the thing pledged.
13. Rights of the creditor-pledgee
a. To retain in his possession the thing pledged until the debt is paid.
b. To demand reimbursement of the expenses made for the preservation of the thing
pledged.
c. To bring actions which pertain to the owner of the thing pledged in order to recover it
from, or defend it against third person.
d. To use the thing pledged only if (1) he is authorized to do so, or (2) when its use is
necessary of the preservation of the thing.
e. To cause the sale of the thing pledged at a public sale, if there is a danger of destruction,
impairment or diminution of value of the thing pledged without his fault.
f. To collect and receive the amount due if the thing pledged is a credit which becomes due
before it is redeemed, and to apply the same to the payment of his claim.
g. To sell the thing pledged upon default of the debtor.
h. To select or choose the thing to be sold in public auction in case there are two or more
things pledged.
i. To appropriate the thing pledged in case the thing pledged is not sold in at least two
public auctions.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
14. Obligations of creditor-pledgee
a. To take care of the thing pledged with the diligence of a good father of a family.
b. To be liable for the loss or deterioration of the thing pledged unless it is due to a
fortuitous event.
c. Not to deposit the thing pledged with a third person unless ordered by the court.
d. To be responsible for the acts of his agents or employees with respect to the thing
pledged.
e. Not to use the thing pledged except (1) when he is authorized by the owner or (2) when
the use of the thing is necessary for its preservation.
f. To deliver to the debtor the surplus after paying his claim from what he has collected on
a credit that was pledged and which has become due before it is redeemed.
g. If the pledge earns or produces fruits, income, dividends, or interests, the creditor shall
compensate what he receives with those which are owing him; but if none are owing
him, or insofar as the amount may exceed that which is due, he shall apply it to the
principal. Unless there is a stipulation to the contrary, the pledge shall extend to the
interest and earnings of the right pledged.
15. Instances when a third person-pledgor who pledges his own movable property to
secure the debt of another person shall be released from liability and may ask for the
return of his pledged personal property from the pledgee
a. If the creditor voluntarily accepts immovable or other property in payment of the debt
even if the creditor thereafter loses the same by eviction.
b. If an extension of time is granted to the debtor by the creditor without pledgor’s consent.
c. If through some act of the creditor, the pledgor cannot be subrogated to the rights,
mortgages and preferences of the creditor.
d. If the thing pledged is deteriorated on the fault of the pledgee.
16. Public Sale of Pledged Personal or Movable Property refers to the remedy available to the
pledgee by which he subjects the property pledged to sale for the satisfaction of the obligation
secured when the principal obligation is not paid when due or when there is any violation of any
condition, stipulation or warranty by the pledgor.
17. Formalities required for the sale of the thing pledged in case of failure of the debtor
to pay the principal obligation
a. It must be by public auction.

b. It must be through a notary public.
c. There must be a notice to the debtor and the owner of the thing pledged, stating the
amount for which the public sale is to be held.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
18. Modes of extinguishment of a contract of pledge
a. Indirect Mode of Extinguishment
i. When the principal obligation or contract of loan secured by the contract of

pledge is extinguished.
b. Direct Modes of Extinguishment of contract of pledge that do not extinguish

the secured contract of loan
i. Return by the pledgee of the thing pledged to the pledgor or owner.
ii. Renunciation or abandonment in writing by the pledgee of the contract of

pledge.
c. Direct Modes of Extinguishment of contract of pledge that also extinguish the

secured contract of loan
i. Sale of the thing pledged regardless of the net proceeds of the sale.
1. Rule in case of deficiency
a. The pledgee can never recover the deficiency despite stipulation

for recovery. Any stipulation for recovery of deficiency is null and
void.
2. Rule in case of excess
a. The pledgee is generally entitled to the excess in the absence of

stipulation to the contrary.
ii. Appropriation of the thing pledged by the pledgee if the thing pledged is not sold
in at least two public auctions.
19. Null and void stipulations in a contract of pledge
I. A stipulation which provides that the pledge is not extinguished by the return of the thing
pledged.
II. A stipulation allowing the automatic appropriation by the pledgee of the thing pledged in
case of default of the debtor.
III. A stipulation for the recovery of deficiency in case the proceeds from the sale of the thing
pledged is less than the amount of the obligation.
20. Legal Pledge is a type of pledge which refers to the right of a person to retain a thing until he
receives payment of his claim.
21. Examples of legal pledge
a. A possessor in good faith may retain the movable upon which he has incurred necessary
and useful expenses until he has been reimbursed therefore.
b. He who has executed work upon movable has a right to retain it by way of pledge until
he is paid.
c. The depositary may retain the thing deposited until the full payment of what may have
been due from him by reason of the deposit.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
22. Distinctions between Contract of or Conventional pledge and Legal pledge
a. As to deficiency from the public sale, the deficiency in foreclosure sale in contract of
pledge can never be recovered by the pledgee but the deficiency in public sale in legal
pledge can be recovered by the creditor.
b. As to excess from the public sale, the excess in foreclosure sale in contract of pledge
will generally go to the pledgee in the absence of stipulation to the contrary but the
excess in the public sale in legal pledge will go to the debtor.
23. Real Estate Mortgage is a contract whereby the debtor or third person secures to the creditor
the fulfilment of a principal obligation, specially subjecting to such security immovable property
or real rights over immovable property in case the principal obligation is not complied with at the
time stipulated.
24. Contracting parties in contract of real estate mortgage
a. Mortgagor refers to the party who mortgaged his immovable or real property to secure
the payment of the principal contract of loan. The mortgagor may be the principal debtor
or third person.
b. Mortgagee refers to the party whose loan receivable is secured by the mortgaged
immovable or real property.
25. Essential requisites of a contract of real estate mortgage

loan.
b. That the mortgagor be the absolute owner of the thing mortgaged.
c. That the person constituting the mortgage must have the free disposal of his property,
and in the absence thereof, that he be legally authorized for the purpose.
26. Important characteristics of real estate mortgage
a. Accessory – It cannot exist without a principal obligation such as contract of loan.

b. Indivisible – It creates a lien on the whole or all of the properties mortgaged, which
lien continues until the obligation is secures has been fully paid.
c. Inseparable – It subjects the property upon which it is imposed, whoever the possessor
may be, to the fulfillment of the obligation for whose security it was constituted.
d. Real right – It creates a lien on the property mortgaged.
e. Consensual contract – It is perfected by mere consent.
f. Nominate – It has a name given to it by law.
27. Types of real estate mortgage
a. Conventional real estate mortgage is one which is created by the agreement of the
parties.
b. Legal mortgage is one executed pursuant, to an express requirement of a provision of

law.
c. Equitable mortgage is one which although lacks certain formality, form or words or
other requisites provided by statute, but the facts show the intention of the parties to
charge the real property as a security for a debt and contains nothing contrary to law.
The remedy of the injured party is to file an action for reformation of instrument.
28. Subject matter of contract of real estate mortgage
a. Immovable property or real property

b. Rights on immovable property
Mobile : 0927 283 8234
Telephone : (043) 723 8412
29. Form of a contract of real estate mortgage for validity vs. Form of a contract of real
estate mortgage to bind third persons - Contract of real estate mortgage may be in any
form for its validity to bind contracting parties because it is a consensual contract perfected by
mere consent but it must be notarized and registered with Registry of Deeds in order to affect or
to bind third persons.
30. Foreclosure of real estate mortgage refers to the remedy available to the mortgagee by
which he subjects the property mortgaged to sale for the satisfaction of the obligation secured
when the principal obligation is not paid when due or when there is any violation of any
condition, stipulation or warranty by the mortgagor.
31. Types of Foreclosure of Real Estate Mortgage
a. Judicial Foreclosure is a type of foreclosure made through the filling of a petition in

court under Rule 68 of Rules of Court and availed of when the deed of real estate
mortgage does not contain a special power of attorney (SPA) authorizing the mortgagee-
creditor to foreclosure it extrajudicially.
i. Equity of Redemption – The judgment debtor/mortgagor has a period of not

less than 90 days nor more than 120 days from the entry of judgment to pay his
liability to prevent the public sale of his mortgaged property. This period of
equity of redemption in judicial foreclosure is extended by the Supreme Court
even after the public auction of mortgaged property as long as it is exercised
before the order of the court confirming the public sale of the mortgaged
property.
ii. Right of Redemption – The judgment debtor/mortgagor is not generally

allowed to repurchase the property sold in public auction in judicial foreclosure
unless a special law allows. As an exception to the general rule, a mortgagor in
judicial foreclosure made by mortgagee-bank may still exercise the right of
redemption in accordance to the redemption period provided by General Banking
Law.
b. Extrajudicial Foreclosure is a type of foreclosure made in compliance with Act No.

3135 (Real Estate Mortgage Law) and available when there is a stipulation in the
mortgage contract that the mortgage may be foreclosed extrajudicially or when such
foreclosure sale is made under a special power of attorney inserted in the contract of
mortgage.
i. Equity of Redemption – The mortgagor may pay his obligation to prevent the
public sale of his property in the grace period given by the mortgagee.
ii. Right of Redemption – The mortgagor may repurchase the property sold in
public auction within a period of:
1. Generally within 12 months or 1 year from public sale
2. Exceptionally within 3 months or 90 days from public sale if these two

requisites are present: (1) the mortgagee is a bank and (2) the
mortgagor is a juridical or artificial person.
32. Rules in deficiency or excess in foreclosure of real estate mortgage
a. Rule in case deficiency

i. The mortgagee can recover the deficiency in the absence of stipulation to the
contrary.
b. Rule in case of excess

i. The mortgagor is entitled to the excess in the absence of stipulation to the
contrary.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
33. Null and void stipulations in a contract of mortgage
I. A stipulation which provides for tipo or upset price in the foreclosure sale of mortgaged
property. A tipo or upset price is a maximum limit as to the selling price in the public sale of
mortgaged property. It is void because the mortgaged property must be sold to the highest
bidder and there must be no maximum limitation on the price.
.
II. A stipulation allowing the automatic appropriation by the mortgagee of the thing mortgaged
in case of default of the debtor.
III. A stipulation prohibiting the mortgagor from disposing or selling his property.
34. Chattel mortgage is a conditional sale of personal property as security for the payment of a
debt, or the performance of some other obligation specified therein, the condition being that the
sale shall be void upon the seller paying to the purchaser a sum of money or doing some other
act named. If the condition is performed according to its terms the mortgage and sale
immediately become void, and the mortgagee is thereby divested of his title.
35. Contracting parties in contract of chattel mortgage
a. Mortgagor refers to the party who mortgaged his movable or personal property to
secure the payment of the principal contract of loan. The mortgagor may be the principal
debtor or third person.
b. Mortgagee refers to the party whose loan receivable is secured by the mortgaged
movable or personal property.
36. Essential requisites of contract of chattel mortgage

loan.
d. That the document in which the mortgage appears be recorded in the Chattel Mortgage
Register.
37. Important characteristics Contract of chattel mortgage

d. Formal contract – It is perfected by the registration to chattel mortgage register.
e. Nominate – It has a name given to it by law.
38. Subject matter of chattel mortgage
a. Movable property or Personal property

b. Incorporeal rights or intangible assets which are evidenced by negotiable instruments,
bill of lading, shares of stocks, bonds, warehouse receipts and similar documents.
39. Form of a contract of chattel mortgage for validity vs. Form of a contract of chattel
mortgage to bind third persons - Contract of chattel mortgage must be registered before
chattel mortgage registry in order to bind contracting parties because it is a formal or solemn
contract but it must be accompanied by affidavit of good faith in order to affect or to bind third
persons.
40. Affidavit of Good faith is an affidavit attached to a deed of chattel mortgage which states that
the parties 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 not one entered into for purposes of fraud.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
41. Rules for the place of registration of Chattel Mortgage
a. As a general rule, it must be recorded in the Chattel Mortgage Register of the province
where the mortgagor resides.
b. If must be recorded in the both Chattel Mortgage Registers of the provinces where the
mortgagor resides and where the property is located if the property is not located in the
province of domicile of the mortgagor.
c. If the mortgagor is domiciled outside the Philippines, the mortgage must be registered in
the Chattel Mortgage Register where the property is located.
d. With respect to motor vehicles, it must be registered Chattel Mortgage Register of the
province where the mortgagor resides and in Land Transportation Office where the
motor vehicle is registered.
e. With respect to shares of stock, Chattel Mortgage Register in the province where the
corporation has its principal office and in the domicile of the mortgagor.
f. With respect to vessel, Philippine Coast Guard of port of entry of vessel and Chattel
Mortgage Register of the province where the mortgagor resides.
42. Foreclosure of chattel mortgage refers to the remedy available to the mortgagee by which
he subjects the property mortgaged to sale for the satisfaction of the obligation secured when
the principal obligation is not paid when due or when there is any violation of any condition,
stipulation or warranty by the mortgagor. The mortgagor is given by Chattel Mortgage Law of
grace period of 30 days from the date of debtor's default to pay the secured obligation in order
to prevent the sale of mortgaged property.
43. Rules in deficiency or excess in foreclosure of chattel mortgage
a. Rule in case of deficiency

i. The mortgagee can recover the deficiency in the absence of stipulation to the
contrary.
b. Rule in case of excess

i. The mortgagor is entitled to the excess in the absence of stipulation to the
contrary.
44. Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an
immovable of his debtor, with the obligation to apply them to the payment of the interest, if
owing, and thereafter to the principal of his credit. It is a formal contract perfected by the
execution of the written instrument containing the antichretic agreement together with the
amount of the principal and interest of the loan
45. Contracting parties in contract of antichresis
a. Antichretic debtor refers to the party who delivered his land to the creditor to secure
the payment of principal contract of loan through the harvesting of its fruits and
subsequent application to the interest and principal of the contract of loan.
b. Antichretic creditor refers to the party who received a land from the debtor which
serves as security for the the payment of principal contract of loan through the
harvesting of its fruits and subsequent application to the interest and principal of the
contract of loan.
46. Important characteristics Contract of Antichresis

d. Formal contract – It is perfected by the written agreement on the contract of
antichresis including the principal and interest of the loan.
e. Nominate – It has a name given to it by law.
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Telephone : (043) 723 8412
47. Principles of Contract of Antichresis
a. The basis for application of the fruits to the interests and principal is the actual market
value of the fruits at the time of application.
b. In the absence of stipulation to the contrary, the antichretic creditor shall generally be
liable to pay the real property taxes and expenses necessary for the repair and
preservation of the real property used as collateral in contract of antichresis by applying
the fruits harvested.
c. Upon non-payment or default of the antichretic debtor of the principal obligation, the
antichretic creditor cannot automatically appropriate the real property used as security
because it is pactum commissorium which is contrary to law and public policy.
d. The antichretic creditor may file an action to collect a sum of money a.k.a. action for
exact fulfillment or specific performance but such action is tantamount to waiver of the
security of antichresis. Afterwards, the antichretic creditor may ask from the judge the
issuance of writ of attachment which might result to the public sale of the land which is
the subject matter of contract of antichresis.
48. Securing Future Obligations
a. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, a chattel mortgage,
however, can only cover obligations existing at the time the mortgage is constituted.
Although a promise expressed in a chattel mortgage to include debts that are yet to be
contracted can be a binding commitment that can be compelled upon, the security itself,
however, does not come into existence or arise until after a chattel mortgage agreement
covering the newly contracted debt is executed either by concluding a fresh chattel mortgage
or by amending the old contract conformably with the form prescribed by the Chattel
Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover
the after-incurred obligation can constitute an act of default on the part of the borrower of
the financing agreement whereon the promise is written but, of course, the remedy of
foreclosure can only cover the debts extant at the time of constitution and during the life of
the chattel mortgage sought to be foreclosed.
b. A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form
prescribed by the Chattel Mortgage Law itself. One of the requisites, under Section 5 thereof,
is an affidavit of good faith. While it is not doubted that if such an affidavit is not appended
to the agreement, the chattel mortgage would still be valid between the parties (not against
third persons acting in good faith 12), the fact, however, that the statute has provided that
the parties to the contract must execute an oath that —
. . . (the) mortgage is made for the purpose of securing the obligation specified in the
conditions thereof, and for no other purpose, and that the same is a just and valid
obligation, and one not entered into for the purpose of fraud. makes it obvious that the
debt referred to in the law is a current, not an obligation that is yet merely
contemplated. In the chattel mortgage here involved, the only obligation specified in the
chattel mortgage contract was the P3,000,000.00 loan which petitioner corporation later
fully paid. By virtue of Section 3 of the Chattel Mortgage Law, the payment of the
obligation automatically rendered the chattel mortgage void or terminated. In Belgian
Catholic Missionaries, Inc., vs. Magallanes Press, Inc., et al., the Court said A mortgage
that contains a stipulation in regard to future advances in the credit will take effect only
from the date the same are made and not from the date of the mortgage.
The significance of the ruling to the instant problem would be that since the 1978 chattel
mortgage had ceased to exist coincidentally with the full payment of the P3,000,000.00
loan, there no longer was any chattel mortgage that could cover the new loans that were
concluded thereafter.
10 | P a g e RLACO/DSALES/NVALDERRAM A
Mobile : 0927 283 8234
Telephone : (043) 723 8412
c. This Court has recognized that, through a dragnet clause, a real estate mortgage contract
may exceptionally secure future loans or advancements. But an obligation is not secured by a
mortgage, unless, that mortgage comes fairly within the terms of the mortgage contract. We
have also emphasized that the mortgage agreement, being a contract of adhesion, is to be
carefully scrutinized and strictly construed against the bank, the party that prepared the
agreement. Furthermore, this Court refuses to be blindsided by the dragnet clause in the
Real Estate Mortgage Contract to automatically include the consumption loan, and its
corresponding interest, in computing the redemption price. As we have held in Prudential
Bank v. Alviar, in the absence of clear and supportive evidence of a contrary intention, a
mortgage containing a dragnet clause will not be extended to cover future advances, unless
the document evidencing the subsequent advance refers to the mortgage as providing
security therefor. In this regard, this Court adopted the "reliance on the security test" used in
the above-mentioned cases, Prudential Bank and Philippine Bank of Communications. In these
Decisions, we elucidated the test as follows: x x x A mortgage with a "dragnet clause" is an
"offer" by the mortgagor to the bank to provide the security of the mortgage for advances of
and when they were made. Thus, it was concluded that the "offer" was not accepted by the
bank when a subsequent advance was made because (1) the second note was secured by a
chattel mortgage on certain vehicles, and the clause therein stated that the note was secured
by such chattel mortgage; (2) there was no reference in the second note or chattel mortgage
indicating a connection between the real estate mortgage and the advance; (3) the
mortgagor signed the real estate mortgage by her name alone, whereas the second note and
chattel mortgage were signed by the mortgagor doing business under an assumed name;
and (4) there was no allegation by the bank, and apparently no proof, that it relied on the
security of the real estate mortgage in making the advance.
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Telephone : (043) 723 8412
Comparison of Pledge, Real Mortgage, Chattel Mortgage and Antichresis
Basis of Conventional Pledge Real Estate Mortgage Chattel Mortgage Antichresis

Difference
Type of Contract Real – By delivery of Consensual – By mere Formal or Solemn – By Formal or Solemn – By
as to perfection object consent registration of the execution of written
contract of chattel agreement of antichresis
mortgage in the Chattel with statement of the
Mortgage Registry amount of principal and
interest of the contract of
loan.
Principal Generally present Generally present Present obligation only Generally present
Obligation Being obligation unless future obligation unless future because of the affidavit obligation unless future
Secured obligations are also obligations are also of good faith prohibiting obligations are also
secured by agreement secured by agreement the securing of future secured by agreement of
of parties by virtue of of parties by virtue of obligation parties by virtue of
dragnet clause dragnet clause dragnet clause
To bind third Must be in a public Must be registered in Must be accompanied by Must be registered in the
persons instrument showing a the Registry of Property affidavit of good faith Registry of Property
description of the thing
pledged and the date of
the pledge
Object of contract Movable or personal Immovable or real Movable or personal Immovable or real
property property property property
Prohibition against Applicable Applicable Applicable Applicable
pactum
commissorium
Indivisibility of the Indivisible Indivisible Indivisible Indivisible
contract
Remedy of Foreclose security and Foreclose security and Foreclose security and Gather the fruits of the
Creditor in case of sell the collateral in sell the collateral in sell the collateral in land and apply the fair
Debtor’s default public action with the public action with the public action with the market value of the fruits
proceeds to be applied proceeds to be applied proceeds to be applied at the time of application
to the unpaid obligation to the unpaid obligation to the unpaid obligation first to the interest of the
loan and the remainder
to the principal of the
loan.
As to deficiency Deficiency can never be Deficiency can be Deficiency can be Deficiency can be
recovered even if there recovered unless there recovered unless there recovered through
is a stipulation. Any is stipulation to the is stipulation to the continuous gathering of
stipulation for recovery contrary. contrary. (Except in case fruits.
of deficiency is null and of personal property
void. (Exception – Legal sold in installment
Pledge) under Recto Law)
As to excess of Excess belongs to the Excess belongs to the Excess belongs to the Excess fruits belongs to
proceeds pledgee-creditor unless mortgagor unless there mortgagor unless there the owner of the land or
there is stipulation to is stipulation to the is stipulation to the antichretic debtor.
the contrary. (Exception contrary. contrary.
– Legal Pledge)
As to appropriation The pledgee may The mortgagee cannot The mortgagee cannot The antichretic creditor
of property appropriate the thing appropriate the thing appropriate the thing cannot appropriate the
pledged if the same is mortgaged. mortgaged. land used as collateral
not sold in two public but may sell the fruits to
auctions. be applied to interest and
principal of loan.
As to selling of The pledgor may only The mortgagor can sell The mortgagor can sell The antichretic debtor
property after the sell the property with the property. Any the property. Any can sell the land.
pledge or the consent of the stipulation prohibiting stipulation prohibiting
mortgage by the pledgee. the mortgagor to sell the mortgagor to sell the
owner. the property is void. property is void.
Conduct of sale of Public sale only GR: Public sale GR: Public sale Not applicable
foreclosed Exception: Private sale if Exception: Private sale
property by stipulated by contracting if stipulated by
creditor parties contracting parties
Redemption None but pledgor can Extrajudicial foreclosure Equity of redemption Not applicable
prevent the public sale – Equity of redemption only within 30 days
by paying the secured and right of redemption from default to pay the
obligation Judicial foreclosure – secured obligation to
Generally equity of prevent the foreclosure
redemption only unless sale
provided by special law
such as Banking Law.
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Name of Contract of Contract of Loan or Contract of Deposit Contract of Lease

Contract Commodatum Mutuum
Definition It is a contract wherein It is a contract wherein It is a contract wherein It is a contract wherein
one of the parties one of the parties a person receives a one party binds himself
delivers to another, delivers to another thing belonging to to give another the
either something not money or other another, with the enjoyment or use of a
consumable so that the consumable thing, upon obligation of safely thing for a price certain,
latter may use the same the condition that the keeping it and of and for a period which
for a certain time and same amount of the returning the same and may be definite or
return it. same kind and quality the the safekeeping of indefinite.
shall be paid. the thing delivered is
the principal purpose of
the contract.
Subject matter 1. Non-consumable thing 1. Money 1. Consumable thing 1. Real property

2. Consumable thing but 2. Consumable thing 2. Non-consumable 2. Personal property
only for purpose of thing
exhibit
Characteristics 1. Real 1. Real 1. Real 1. Consensual
2. Essentially gratuitous 2. Onerous if there is 2. Onerous if there 2. Onerous
interest or gratuitous if depositary fee or
there is no interest. gratuitous if for free.
Quizzer in Contract of Pledge, Mortgage and Antichresis
1. The following requisites are essential to the contracts of pledge, real estate mortgage and chattel
mortgage, except
a. That they be constituted to secure the fulfillment of a principal obligation such as
contract of loan.
b. That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged.
c. That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.
d. That when the principal obligation becomes due, the things in which the pledge or
mortgage consists may be alienated for the payment of the creditor.
e. That the thing pledged or mortgaged be placed in the possession of the creditor, or of a
third person by common agreement.
2. The following are the kinds of principal obligations that may be secured by a contracts of pledge,
of real estate mortgage or of chattel mortgage, except
a. Pure obligations
b. Conditional obligations whether suspensive condition or resolutory condition
c. Obligations with a period whether suspensive period (ex die) or resolutory period (in
diem)
d. Natural obligations
e. Rescissible obligations
f. Voidable obligations
g. Unenforceable obligations
h. Null and void obligations
3. When is the pledgor or mortgagor required to be the owner of the thing pledged or mortgaged
for the validity of contracts of pledge, of real estate mortgage or of chattel mortgage?
a. At the time the principal obligation is constituted.
b. At the time the contract of pledge or mortgage is constituted or perfected.
c. At the time of the failure to pay the principal obligation.
d. At the time the thing to be pledged or mortgaged is to be delivered.
4. D borrowed P1,000,000 from C. G, a third person, mortgaged his land to secure the fulfillment of
D’s loan. Is the contract of mortgage valid?
a. No because D must be the owner of the mortgaged land.
b. Yes provided G will deliver the land to C.
c. Yes because third persons who are not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property.
d. No because G is no privy to the contract of loan.
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5. D borrowed P20,000 from C. To secure the fulfillment of the loan, D mortgaged a land owned by
his ailing father. Which of the following statements is correct?
a. The contract of mortgage is valid because future property may be pledged or mortgaged.
b. The contract of loan is null and void because the contract of mortgage is null and void.
c. The contract of mortgage will become valid upon the death of D’s father.
d. The contract of mortgage is null and void because the mortgagor must be the owner of
the property mortgaged at the time it is constituted but the contract of loan remains to
be valid.
6. ABC Inc. borrowed P2,000,000 from BPI. ABC Inc. is under receivership. To secure the fulfillment
of the loan, ABC mortgaged its administrative building. Which of the following statements is
correct?
a. The contract of mortgage is null and void because the mortgagor has no free disposal of
the thing.
b. The contract of mortgage is valid because the mortgagor is the absolute owner of the
property mortgaged at the time the mortgage is constituted.
c. The contract of mortgage is null and void because only natural person may enter in a
contract of mortgage.
d. The contract of mortgage is voidable.
7. It is a stipulation whereby the thing pledged or mortgaged shall automatically become the
property of the creditor in the event of non-payment of the debt within the term fixed.
a. Pactum creditarium
b. Pactum commissorium
c. Pactum debitarium
d. Pactum crematorium
8. D borrowed P10,000 from C. To secure the fulfillment of the loan, D pledged his laptop. The
contract of pledge provides that the creditor-pledgee may automatically appropriate the laptop
upon failure of the debtor-pledgor to pay the loan. On the date of maturity of the loan, D failed
to pay the loan. Which of the following statements is correct?
a. C becomes the owner of the laptop.
b. The laptop cannot be alienated for the payment of the loan.
c. C does not become the automatic owner of the laptop upon D’s failure to pay the loan
because that provision is considered pactum commissorium which is contrary to law and
public policy.
d. The contract of pledge is null and void because of pactum commissorium provision.
9. D borrowed P10,000 from C. To secure the fulfillment of the loan, D pledged his laptop. On the
date of maturity of the loan, D failed to pay the loan. As a result, D and C agreed that the
pledged laptop shall be owned by C in full satisfaction of the secured contract of loan. Which of
the following statements is correct?
a. C becomes the owner of the laptop by reason of dacion en pago which is governed by
Law on Sales.
b. The laptop cannot be alienated for the payment of the loan.
c. C does not become the automatic owner of the laptop upon D’s failure to pay the loan
because their subsequent agreement is considered pactum commissorium which is
contrary to law and public policy.
d. Their subsequent agreement for the payment of the loan shall be governed by law on
obligation because that is a novation.
10. The following are the instances where the thing pledged or mortgaged may be sold or alienated
to pay the principal obligation, except
a. If the pledgor or mortgagor fails to fulfill certain conditions and such violation would
make the debt due and demandable.
b. If the debtor has lost the right to make use of the period or where there is an
acceleration clause in the payment of installment.
c. Upon default to pay the obligation at maturity.
d. Before maturity of the principal obligation.
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Telephone : (043) 723 8412
11. What is the nature of a contract of pledge, of chattel mortgage, of real estate mortgage or of
antichresis?
a. It is divisible if the principal contract is joint.
b. It is indivisible if the principal contract is solidary.
c. It is divisible whether the principal contract is joint or solidary.
d. It is indivisible whether the principal contract is joint or solidary.
12. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value
respectively. After several days, D pays P4,000 to C. Which of the following statements is
correct?
a. The contract of pledge is extinguished.
b. The contract of loan is extinguished.
c. D cannot demand the release of his ring because a contract of pledge is indivisible.
d. D may compel C to return the ring because P4,000 of the loan is already paid.
13. D borrowed from C P100,000 secured by a mortgage on D’s two lots (lot 1 and lot 2). D dies
leaving E and F as heirs with E inheriting lot 1 and F lot 2. F pays P50,000 of the loan. Which of
a. F may ask for the extinguishment of the mortgage on lot 2.
b. The contract of mortgage is extinguished.
c. The contract of loan is extinguished.
d. F cannot ask for the extinguishment of the mortgage on lot 2.
14. Using the same data in preceding number, suppose it is C who dies leaving X and Y as heirs. If D
pays X P50,000, which of the following statements is correct?
a. X may cancel the mortgage to the prejudice of Y.
b. X cannot cancel the mortgage to the prejudice of Y.
c. The contract of mortgage is extinguished.
d. The contract of loan is extinguished.
15. D borrowed P10,000 from C and pledged his ring and watch with P4,000 and P6,000 value
respectively. They agreed that the ring will secure P4,000 of the loan and the watch will secure
the balance of the loan. After several days, D pays P4,000 to C. Which of the following
statements is correct?
a. The contract of pledge on the watch is extinguished.
b. The contract of loan is fully extinguished.
c. D cannot demand the release of his ring because a contract of pledge is indivisible.
d. D may compel C to return the ring because contract of pledge on the ring is
extinguished.
16. A and B jointly borrowed P10,000 from C. In order to secure their respective obligations, A
pledged his cellphone while B pledged his laptop. At the maturity date of the loan, A paid P5,000
of the loan. Which of the following statements is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a contract of pledge is indivisible.
d. The contract of pledge on the laptop is extinguished.
17. A and B jointly borrowed P10,000 from C. In order to secure the obligation, A pledged his
cellphone while B pledged his laptop. At the maturity date of the loan, A paid P5,000 of the loan.
Which of the following statements is correct?
a. The contract of pledge on the cellphone is extinguished.
b. The obligation of B is extinguished.
c. A cannot demand the release of his cellphone because a contract of pledge is indivisible.
d. The contract of pledge on the laptop is extinguished.
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18. It is a contract by virtue of which the debtor delivers to the creditor or to a third person a
movable, or instrument evidencing incorporeal rights for the purpose of securing the fulfillment of
a principal obligation with the understanding that when the obligation is fulfilled, the thing
delivered shall be returned with all its fruits and accessions.
a. Contract of Pledge
b. Contract of Chattel mortgage
c. Contract of Real estate mortgage
d. Contract of Antichresis
19. In case the cause or consideration of the contract of pledge is not stipulated, what is the cause
or consideration of a contract of pledge?
a. It has no cause or consideration.
b. The cause or consideration of the principal obligation or contract of loan.
c. The cause or consideration is the liberality of the pledgor.
d. The cause is the service remenerated.
20. The following are the characteristics of a contract of pledge, except

a. Consensual – It is perfected by mere consent.
b. Accessory – It has no independent existence of its own because there must be contract
of loan.
c. Unilaterial – It creates an obligation on the part of the creditor to return the thing upon
the fulfillment of the principal obligation.
d. Subsidiary – The obligation incurred does not arise until the fulfillment of the principal
obligation which is secured.
21. The following are the essential requisites of conventional pledge or contract of pledge, except
loan.
b. That the pledgor be the absolute owner of the thing pledged.
c. That person constituting the pledge has the free disposal of his property, and in the
d. That the thing pledged be placed in the possession of the creditor, or a third person by
common agreement or there must be delivery of the thing pledged.
e. That the contract of pledge be constituted in public document.
22. What is the nature of a contract to constitute a pledge?

a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
23. What is the legal effect of a promise or contract to constitute a pledge?

a. It is perfected by delivery of the thing pledge.
b. It is perfected through the notarization of the promise.
c. It is perfected by mere consent and gives rise only to a personal action between the
contracting parties.
d. It gives rise to a real action over the thing pledged.
24. The following statements pertaining to a promise to constitute a pledge or mortgage are correct,
except
a. It gives rise only to a personal action between the contracting parties.
b. The contract perfected is a real contract.
c. It creates no real right in the property but only a right to compel the fulfillment of the
promise but there is no contract of pledge or contract of mortgage yet.
d. The promissor will be criminally liable if he mortgages or pledges as unencumbered
things which he knew were subject to some burden.
25. What is the nature of a contract of pledge?

a. Consensual contract
b. Real contract
c. Formal contract
d. Solemn contract
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26. The following may become the object of a contract of pledge, except
a. All movable
b. Personal property susceptible of possession.
c. Incorporeal rights which are evidenced by negotiable instruments, bill of lading, shares of
stocks, bonds, warehouse receipts and similar documents.
d. Real or immovable properties and rights thereon.
27. What is the form of contract of pledge to bind the contracting parties?
a. It must be in a private instrument.
b. It must be in a public instrument.
c. It must be registered in the registry of deeds.
d. It may be in any form because it is a real contract.
28. What is the form of contract of pledge to bind or to affect third persons?
a. It must be registered in the chattel mortgage registry.
b. It must be registered in the registry of deeds.
c. It must be in a public instrument showing a description of the thing pledged and the date
of the pledge.
d. It must be recorded in the Intellectual Property Office.
29. The contract of pledge shall cover the following, except

a. The thing pledged.
b. The fruits, income, dividends or interests earned or produced by the thing pledged,
unless there is stipulation excluding them.
c. The offspring, when the thing pledged is an animal, unless there is a stipulation
excluding them.
d. The future inheritance of the pledgor.
30. The following are the rights of the debtor-pledgor, except

a. To alienate, with the consent of the pledgee, the thing pledged.
b. To continue to be the owner of the thing pledged unless it is expropriated.
c. To become the owner of the offspring of the animal pledged if there is no stipulation to
the contrary but such offspring shall be subject to the pledge.
d. To ask for the return of the thing pledged after he has paid the debt and its interest, with
e. To ask that the thing pledged be judicially or extra-judicially deposited if it is used
without authority or for a purposes other than for its preservation.
f. To require that the thing be deposited with a third person if it is in danger of being lost
or impaired through the negligence or willful act of the pledgee.
g. To demand the return of the thing pledged, upon offering another thing in pledge,
provided the latter is of the same kind and quality, if there are reasonable grounds to
fear the destruction or impairment of the thing pledged without the fault of the pledgee.
This right is without prejudice to the right of the pledgee to have the thing sold at a
public sale.
h. To demand the return of the thing pledged despite defaulting on the payment of the
secured principal obligation.
31. In case the thing pledged is alienated by the debtor-pledgor to third person, what is the effect of
the consent of the pledgee to the alienation made by the pledgor of the thing pledged to third
person?
a. The thing pledged remains to be owned by the debtor-pledgor
b. The ownership of the thing pledged is transmitted to the buyer.
c. The creditor-pledgee loses possession of the thing pledged.
d. The contract of pledge is already extinguished.
32. What is the remedy of the pledgor-debtor if the pledgee-creditor use the thing pledged, without
the authority of the owner or should misuse the thing in any other way?
a. To ask that it be judicially or extra-judicially deposited.
b. To ask for the return of the thing pledged.
c. To ask for the extinguishment of the contract of pledge.
d. To ask for the extinguishment of the contract of loan.
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Telephone : (043) 723 8412
33. What is the remedy of the pledgor-owner if the thing pledged is in danger of being lost or
impaired through the negligent or willful act of the pledgee?
a. To require that it be deposited with a third person.
b. To ask for the return of the thing pledged.
34. What is the remedy of the pledgor-owner if there are reasonable grounds to fear the destruction
or impairment of the thing pledged, without the fault of the pledgee?
a. To ask for the return of the thing, upon offering another thing in pledge, provided the
latter is of the same kind as the former and not of inferior quality but subject to the right
of the pledgee to sell the said pledged item in public auction.
b. To require that it be deposited with a third person.
35. If there are reasonable grounds to fear the destruction or impairment of the thing pledged,
without the fault of the pledgee, which is correct?
a. The pledgor-owner may ask for the return of the thing, upon offering another thing in
pledged, provided the latter is of the same kind as the former and not of inferior quality
even it is already sold in public auction by the pledgee-creditor.
b. The pledgee-creditor may cause the sale of the thing pledged at a public sale and the
proceeds of the auction shall be a security for the principal obligation in the same
manner as the thing originally pledged. However, the pledgee is bound to advise the
pledgor, without delay, of any danger to the thing pledged.
c. The right of the pledgor-owner is superior to the right of the pledgee-creditor.
d. The contract of pledge is extinguished by the sale of the thing pledged in the public
auction.
36. The following are the obligations of the debtor-pledgor, except

a. To pay the debt and its interest, with expenses, in a property case, when they are due.
b. To pay damages that the pledgee may suffer by reason of the flaws of the thing pledged,
if he was aware of such flaws but he did not advise the pledgee of the same.
c. To pay for the expenses which are necessary for the preservation of the thing pledged.
d. To warrant the thing pledged for its quality and merchantability.
37. The following are the rights of the creditor-pledgee, except

a. To retain in his possession the thing pledged until the debt is paid.
b. To demand reimbursement of the expenses made for the preservation of the thing
pledged.
c. To bring actions which pertain to the owner of the thing pledged in order to recover it
from, or defend it against third person.
d. To use the thing pledged if he is authorized to do so, or when its use is necessary of the
preservation of the thing.
e. To cause the sale of the thing pledged at a public sale, if there is a danger of destruction,
impairment or diminution of value of the thing pledged without his fault. The pledgee is
bound to advise the pledgor, without delay, of any danger to the thing pledged.
f. To collect and receive the amount due if the thing pledged is a credit which becomes due
before it is redeemed, and to apply the same to the payment of his claim.
g. If the pledge earns or produces fruits, income, dividends, or interests, the creditor shall
compensate what he receives with those which are owing him; but if none are owing
him, or insofar as the amount may exceed that which is due, he shall apply it to the
principal. Unless there is a stipulation to the contrary, the pledge shall extend to the
interest and earnings of the right pledged.
h. To sell the thing pledged upon default of the debtor.
i. To appropriate the thing pledged in case the thing pledged is not sold in first and second
public auctions.
j. To become the automatic owner the thing pledged upon first default of debtor to pay the
principal obligation at maturity date.
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38. The following are the obligations of creditor-pledgee, except

a. To take care of the thing pledged with the diligence of a good father of a family.
b. To be liable for the loss or deterioration of the thing pledged unless it is due to a
fortuitous event.
c. To be responsible for the acts of his agents or employees with respect to the thing
pledged.
d. Not to use the thing pledged except when he is authorized by the owner or when the use
of the thing is necessary for its preservation.
e. To deliver to the debtor the surplus after paying his claim from what he has collected on
a credit that was pledged and which has become due before it is redeemed.
f. To deposit the thing pledged with a third person even not authorized by the court.
39. The following are the rights of a third person who pledges his own movable property to secure
debt of another, except
a. To be indemnified by the debtor if he pays the creditor.
b. To be subrogated to all the rights of the creditor against the debtor if he pays the
creditor.
c. To be released from liability in the cases provided by law.
d. To become principally liable.
40. Grace obtained a loan from Jojo in the amount of P1M with Mar serving as guarantor. Rody
pledged his cellphone to secure the debt of Grace. If Rody pays the P1M loan of Grace, which is
correct?
a. There will be no legal subrogation if Grace does not consent to the payment of Rody.
b. Rody cannot collect the P1M from Grace if the latter does not consent to the payment of
Rody.
c. Rody can collect the P1M from Mar if Grace will not be able to pay Rody.
d. Mar is not liable to Rody.
41. A third person who pledges his own movable property to secure the debt of another shall be
released from liability in the following cases and may ask for the return of the thing pledge from
the pledgee, except
a. If the creditor voluntarily accepts immovable or other property in payment of the debt
even if the creditor thereafter loses the same by eviction.
b. If an extension of time is granted to the debtor by the creditor without pledgor’s consent.
c. If through some act of the creditor, the pledgor cannot be subrogated to the rights,
mortgages and preferences of the creditor.
d. If the thing pledged is deteriorated on the fault of the pledgee.
e. If the debtor defaults in the payment of principal obligation on the maturity date.
42. If two or more things are pledged, who has the right to choose which thing will be sold in the
absence of stipulation?
a. Pledgor
b. Pledgee
c. Debtor
d. Government
43. Pledge may be extinguished directly or indirectly. The following are the modes of extinguishing
the contract of pledge directly, except
a. When the principal obligation secured by the pledged is extinguished.
b. Return by the pledgee of the thing pledged to the pledgor or owner.
c. Renunciation or abandonment in writing by the pledgee of the pledge.
d. Sale of the thing pledged regardless of the net proceeds.
e. Appropriation of the thing pledged by the pledgee if the thing pledged is not sold in the
first and second auctions.
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44. Which of the following direct modes of extinguishing contract of pledge impliedly extinguish the
principal obligation or contract of loan?
I. Return by the pledgee of the thing pledged to the pledgor or owner.
II. Renunciation or abandonment in writing by the pledgee of the contract of pledge.
III. Sale of the thing pledged in public auction in case of default by debtor regardless of the
amount of the net proceeds of sale.
IV. Appropriation of the thing pledged by the pledgee in case the thing pledged is not sold in the
first and second public auctions.
a. I and II
b. III and IV
c. I and III
d. II and IV
45. Which of the following direct modes of extinguishing contract of pledge do not impliedly
extinguish the principal obligation or contract of loan?
I. Return by the pledgee of the thing pledged to the pledgor or owner.
II. Renunciation or abandonment in writing by the pledgee of the contract of pledge.
III. Sale of the thing pledged in public auction in case of default by debtor regardless of the
amount of the net proceeds of sale.
IV. Appropriation of the thing pledged by the pledgee in case the thing pledged is not sold in the
first and second public auctions.
a. I and II
b. III and IV
c. I and III
d. II and IV
46. Which of the following stipulations in a contract of pledge is null and void?
I. A stipulation which provides that the contract of pledge is not extinguished by the return of
the thing pledged.
II. A stipulation allowing the appropriation by the pledgee of the thing pledged in case the same
is not sold in the first and second auctions.
III. A stipulation for the recovery of deficiency in case the proceeds from the sale of the thing
pledged is less than the amount of the obligation.
a. I and III
b. II and III
c. I and II
d. I, II and III
47. If the thing is found in the possession of the pledgor or owner or if the thing is in the possession
of a third person who has received it from the pledgor or owner, which of the following is
incorrect?
a. There is prima facie presumption that the contract of pledge is extinguished.
b. There is prima facie presumption that pledgee returned the thing pledged.
c. There is prima facie presumption that the contact of loan is extinguished.
48. Which of the following statements is incorrect in case the pledgee renounces or abandons in
writing the contract of pledge?
a. The contract of pledge is extinguished but the contract of loan remains.
b. The acceptance by the pledgor is not necessary for extinguishing contract of pledge.
c. The pledgee becomes a depositary upon renunciation if in the meantime, the thing
pledged is not yet returned to the owner.
d. The return of the thing pledged is necessary for extinguishing the contract of pledge for
this mode of contract of pledge extinguishment.
49. The following are the formalities required for the sale of the thing pledged in case of failure of
the debtor to pay the principal obligation, except
a. It must be by public auction.
b. It must be through a notary public.
c. There must be a notice to the debtor and the owner of the thing pledged, stating the
amount for which the public sale is to be held.
d. The thing pledged must be sold by the pledgee at the first auction only.
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50. Sale of pledged personal property in contract of pledge shall be made in

a. Public auction or sale only
b. Private auction or sale only
c. Generally public auction or sale unless there is agreement for private auction or sale
d. Generally private auction or sale unless there is agreement for public auction or sale
51. The following persons may bid at the public auction, except
a. The pledgor or owner
b. The pledgee if there are other bidders
c. Third persons
d. The pledgee even if he is the only bidder
52. In case the bids of the pledgor-owner, the pledgee and a third person are equal and considered
the highest bid, who shall be preferred among them?
a. Pledgee
b. Pledgor-owner
c. Third person
53. What is the effect of sale at public auction of the thing pledged?
a. It does not extinguish the contract of pledge.
b. The contract of pledge and principal/contract of loan obligation shall be extinguished if
the proceeds of the sale are equal to the amount of the principal obligation, interest and
c. The contract of pledge and principal obligation/contract of loan shall be extinguished if
the proceeds of the sale exceed the amount of the principal obligation, interest and
d. The contract of pledge and principal obligation/contract of loan shall be extinguished
whether or not the proceeds of the sale are equal to the amount of the principal
obligation, interest and expenses in a proper case.
54. If the proceeds of the sale of the thing pledged in conventional pledge is more than the amount
of the obligation, which of the following statements is true?
a. The debtor-pledgor shall be entitled to the excess unless there is an agreement to the
contrary.
b. The creditor-pledgee shall always be entitled to the excess.
c. The creditor-pledgee shall be entitled to the excess unless there is an agreement to the
contrary.
d. The debtor-pledgor shall always be entitled to the excess.
55. If the proceeds of the sale of the thing pledged in conventional pledge is less than the amount of
the obligation, which of the following statements is true?
a. The debtor-pledgor shall always pay for the deficiency.
b. The creditor-pledgee cannot recover the deficiency even if stipulated.
c. The creditor-pledgee can recover deficiency only if stipulated.
d. The debtor-pledgor shall pay for the deficiency if stipulated.
56. If the thing pledged is not sold in the first and second public auctions, which of the following
statements is incorrect in case of appropriation by the pledgee of the thing pledged?
a. The creditor may appropriate the thing pledged validly.
b. The contract of pledge is extinguished if the creditor decided to appropriate the thing
pledged.
c. The principal obligation/contract of loan is not extinguished if the creditor decided to
appropriate the thing pledged.
57. DLSU pledged its notes receivable from a parent to a factor on January 1, 2016 with remaining
term of 30 days or maturity date of January 31, 2016. The face value of the notes receivable is
P1,000,000 with maturity value of P1,200,000. The notes receivable is pledged for a note payable
of P1,100,000 inclusive of interest. If the factor-pledgee collects the P1,200,000 from the parent
on January 31, 2016, who shall be entitled for the excess of P100,000?
a. DLSU, the pledgor-debtor
b. Parent
c. Factor, the pledgee-creditor
d. None of the above
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58. It is a type of pledge which refers to the right of a person to retain a thing until he receives
payment of his claim.
a. Conventional pledge
b. Voluntary pledge
c. Agreed pledge
d. Legal pledge or pledge by operation of law
59. The following are examples of legal pledge, except

a. A possessor in good faith may retain the movable upon which he has incurred necessary
and useful expenses until he has been reimbursed therefore.
b. He who has executed work upon movable has a right to retain it by way of pledge until
he is paid.
c. The depositary may retain the thing deposited until the full payment of what may have
been due from him by reason of the deposit.
d. A contract by virtue of which the debtor delivers to the creditor or to a third person a
movable, or instrument evidencing incorporeal rights for the purpose of securing the
fulfillment of a principal obligation with the understanding that when the obligation is
fulfilled, the thing delivered shall be returned with all its fruits and accessions.
60. The provisions on conventional pledge on the possession, care and sale of the thing as well as on
the termination of the pledge shall be applicable to legal pledge except with respect to the sale of
the thing as follows. The following are the rules applicable to legal pledge on the sale of the thing
pledged, except
a. The thing may be sold only after demand of the amount for which the thing is retained.
b. The public auction shall take place within one month after such demand.
c. If without just grounds, the creditor does not cause the public sale to be held within such
period, the debtor may require the return of the thing.
d. In case there is deficiency from the public sale, the pledgee-creditor may still recover the
deficiency even if not stipulated.
e. After payment of debt and expenses, the remainder of the price of sale shall be retained
by the pledgee-creditor.
61. In case of legal pledge or pledge by operation of law, if the thing held in pledged by operation of
law is sold by the creditor in public auction resulting to excess, who shall be entitled to the
excess?
a. The debtor/owner of the thing sold even if not stipulated.
b. The creditor or foreclosing party if stipulated.
c. The creditor or foreclosing party even if not stipulated.
d. The debtor/owner of the thing sold only if stipulated.
62. In case of legal pledge or pledge by operation of law, if the thing held in pledged by operation of
law is sold by the creditor in public auction resulting to deficiency, may there be recovery of
deficiency by the creditor?
a. No even if stipulated because any stipulation for recovery of deficiency in of pledge is
void.
b. Yes even if not stipulated.
c. Yes but it must be stipulated by the contracting parties.
d. No because it is pledged by operation of law.
63. It is a contract whereby the debtor or third person secures to the creditor the fulfillment of a
principal obligation, specially subjecting to such security immovable property or real rights over
immovable property in case the principal obligation is not complied with at the time stipulated.
a. Contract of Real estate mortgage
c. Contract of Pledge
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64. The following are the essential requisites of a contract of real estate mortgage for its validity,
except
a. That it be constituted to secure the fulfillment of a principal obligation.
d. That the document in which the mortgage appears be recorded in the Registry of
Property.
65. The following are the important characteristics of contract of real estate mortgage, except
a. Accessory – It cannot exist without a principal obligation.
b. Indivisible – It creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation it secures has been fully paid.
e. Real contract – It is perfected by the delivery of the thing mortgaged.
66. Which of the following statements pertains to equitable mortgage?

a. It is one which is created by the agreement of the parties.
b. It is one executed pursuant, to an express requirement of a provision of law.
c. It is one which although lacks certain formality, form or words or other requisites
provided by statute, shows the intention of the parties to charge the real property as a
security for a debt and contains nothing contrary to law.
67. The following may become object of contract of real estate mortgage, except
a. Immovable property
b. Real property
c. Rights on immovable property
d. Personal property
68. What is the status of contract of real estate mortgage if the property covered as collateral is a
personal property instead of real property?
a. The contract of real estate mortgage is always void because the subject matter of real
estate mortgage is immovable property.
b. The contract of real estate mortgage may be valid as to the contracting parties on the
basis of doctrine of estoppel but the third person directly affected by said void contract
may ask for its declaration of nullity.
c. The contract of real estate mortgage will be valid to both contracting parties and even
third persons.
d. Third persons who are not directly affected by the real estate mortgage may ask for the
declaration of nullity of the real estate mortgage contract.
69. Which of the following statements concerning formalities of real estate mortgage is incorrect?
a. The real mortgage may be in any form to be valid since it is a consensual contract.
b. The real mortgage must be in a public instrument for the convenience of the parties but
not for validity.
c. The real mortgage must be registered in the Registry of Property to bind third persons.
d. The real mortgage must be in writing to be valid since it is a formal contract.
70. The contract of real estate mortgage shall cover the following (R-I-N-G-I-R), except
a. Real property mortgaged
b. Improvements
c. Natural accessions
d. Growing fruits
e. Indemnity granted or owing to the proprietor from the insurers of the property
mortgaged or in virtue of expropriations for public use.
f. Rents and income not yet received when the obligation becomes due
g. Future inheritance of the mortgagor
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71. The following stipulations concerning real estate mortgage are null and void, except
a. A stipulation forbidding the owner from alienating the immovable mortgaged.
b. A stipulation providing that the mortgagee shall become the automatic owner of the
property mortgaged upon failure of the debtor to pay the principal obligation.
c. Tipo or upset price which refers to price set by the parties as the amount at which the
property at which the property will be sold at public auction.
d. A stipulation prohibiting a second mortgage with respect to property registered under the
Torrens System.
72. It refers to the right of mortgagor to redeem the mortgaged property after his default of the
performance of his obligation by paying the secured obligation in order to prevent the public sale
of his mortgaged property.
a. Equity of redemption
b. Right of redemption
c. Right of preemption
d. Equity of preemption
73. It refers to the right of the mortgagor to repurchase the property within a certain period after it
was sold in public auction for the payment of the secured debt.
a. Equity of redemption
b. Right of redemption
c. Right of preemption
d. Equity of preemption
74. It refers to the remedy available to the mortgagee by which he subjects the property mortgaged
to the satisfaction of the obligation secured when the principal obligation is not paid when due or
when there is any violation of any condition, stipulation or warranty by the mortgagor.
a. Dation en pago
b. Foreclosure
c. Novation
d. Compensation
75. It is a type of foreclosure made through the filling of a petition in court under Rule 68 of Rules of
Court and availed of when the deed of real estate mortgage does not contain a special power of
attorney (SPA) authorizing the extrajudicial foreclosure by the mortgagee-creditor.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure
76. In case of judicial foreclosure, if upon the trial in such action the court shall find the facts set
forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the
mortgage debt or obligation, including interest and other charges as approved by the court, and
costs, and shall render judgment for the sum so found due and order that the same be paid to
the court or to the judgment obligee. This is known as equity of redemption of judgment debtor
and the amount shall be paid by the judgment debtor. What is the period for exercise of equity of
redemption in case of judicial foreclosure?
a. Within a period of not less than 90 days nor more than 120 days from the entry of
judgment.
b. Within a period of not less than 1 year nor more than 2 years from the entry of
judgment.
c. Within a period of not less than 90 days nor more than 1 year from the entry of
judgment.
d. Within a period of not less than 120 days nor more than 1 year days from the entry of
judgment.
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77. In case the judgment debtor in judicial foreclosure failed to exercise his equity of redemption, the
property shall be ordered by the trial court to be sold at public auction. In such a case, the
foreclosure sale, generally, when confirmed by an order of the court, shall operate to divest the
rights of all the parties to the action and to vest their rights in the purchaser. May the judgment
debtor still redeem the property already foreclosed and sold in public auction?
a. Yes because he has right of redemption which is 1 year from the confirmation of the
sale.
b. No he can never redeem the property because the equity of redemption has already
expired.
c. Yes because he can exercise his equity of redemption even beyond the 90 days from
entry of judgment or even after the foreclosure sale itself as long as it is prior to the
court’s order of confirmation of the sale.
d. Yes because his right of redemption is not subject to a period.
78. Is the right of redemption available to the judgment debtor in case of judicial foreclosure?
a. Yes in all instances.
b. No except in those cases provided by special laws.
c. No in all instances.
d. Yes except in those cases provided by special laws.
79. Under Section 47 of RA 8791 (General Banking Laws), in the event of foreclosure made by banks,
whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan
or other credit accommodation granted, the mortgagor or debtor whose real property has been
sold for the full or partial payment of his obligation shall have the right of redemption. What is
the period for exercise of right of redemption in case of judicial or extrajudicial foreclosure made
by banks?
a. within one year after the sale of the real estate.
b. within 90 days after the sale of the real estate.
c. within 6 months year after the sale of the real estate.
d. within 2 years after the sale of the real estate.
80. It is a type of foreclosure made in compliance with Act No. 3135 (Real Estate Mortgage Law)
whereby foreclosure sale is made under a special power of attorney inserted in the real estate
mortgage contract which authorized extrajudicial foreclosure.
a. Legal foreclosure
b. Conventional foreclosure
c. Judicial foreclosure
d. Extra-judicial foreclosure
81. When a real property is foreclosed and sold under Act No. 3135 (Real Estate Mortgage Law) in
case of extra-judicial foreclosure of Real Estate Mortgage, the public auction sale shall be made
at the
a. Province where the property is situated
b. Domicile of the mortgagor
c. Domicile of the mortgagee
d. At any place in the Philippine
82. In all cases of extrajudicial foreclosure made under Act No. 3135 (Real Estate Mortgage Law), the
following persons may redeem the real property sold in the public auction, except
a. Debtor-mortgagor
b. Successor in interest of debtor-mortgagor
c. Judgment creditor of the debtor-mortgagor
d. Any person having a lien on the real property sold subsequent to the mortgagee or deed
of trust
e. Any third person
83. In extrajudicial foreclosure, sale of foreclosed real property in contract of real estate mortgage
shall be made in
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84. In case of extrajudicial foreclosure of real property under Act No. 3135 (Real Estate Mortgage
Law), what is the period of the exercise of right of redemption by the debtor-mortgagor or any
other persons authorized by the said law?
a. Within the term of one year and after the date of sale or registration of the sheriffs
certificate of foreclosure sale.
b. Within the term of 90 days and after the date of extrajudicial sale or registration of the
sheriffs certificate of foreclosure sale.
c. Within the term of two years and after the date of extrajudicial sale or registration of the
sheriffs certificate of foreclosure sale.
d. Within the term of six months and after the date of extrajudicial sale or registration of
the sheriffs certificate of foreclosure sale.
85. Notwithstanding Act No. 3135 (Real Estate Mortgage Law), under Section 47 of RA 8791 (General
Banking Laws) what is the period of right of redemption available to mortgagor-juridical persons,
(corporation, association, or partnership) in extrajudicial foreclosure made by mortgagee-bank?
a. Within 3 months after the foreclosure and sale but not after the registration of the
certificate of foreclosure sale with the applicable Register of Deeds.
b. Within 6 months after the foreclosure and sale but not after the registration of the
c. Within 1 year after the foreclosure and sale but not after the registration of the
d. Within 2 years after the foreclosure and sale but not after the registration of the
86. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Real Estate Mortgage
is higher than the principal obligation and costs, which is true?
a. The mortgagee may retain the excess in the absence of stipulation to the contrary.
b. The mortgagor is entitled to the excess in the absence of stipulation to the contrary.
c. The mortgagee shall always retain the excess.
d. The mortgagor shall always recover the excess.
87. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Real Estate Mortgage
is lower than the principal obligation and costs, which is true?
a. The mortgagee may recover the deficiency in the absence of stipulation to the contrary.
b. The mortgagor shall not pay the deficiency in the absence of stipulation to the contrary.
c. The mortgagee shall always recover the deficiency.
d. The mortgagor shall always pay the deficiency
88. Indicate the proper order on how the proceeds of sale from judicial or extrajudicial foreclosure of
Real Estate Mortgage shall be distributed:
I. Cost of sale.
II. Claim of the person foreclosing the mortgage.
III. Claims of junior encumbrances in the order of their priority.
IV. Mortgagor or his agent.
a. I – II – III – IV
b. I – III – II – IV
c. II – I – IV – III
d. III – II – I – IV
89. It is a conditional sale of personal property as security for the payment of a debt, or the
performance of some other obligation specified therein, the condition being that the sale shall be
void upon the seller paying to the purchaser a sum of money or doing some other act named. If
the condition is performed according to its terms the mortgage and sale immediately become
void, and the mortgagee is thereby divested of his title.
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90. The following are the requisites of chattel mortgage for its validity, except
a. That it be constituted to secure the fulfillment of a principal obligation.
d. That the document in which the mortgage appears be recorded in the Chattel Mortgage
Register.
e. That an affidavit of good faith must be appended to the Deed of Chattel of Mortgage and
recorded therewith in the Chattel Mortgage Register.
91. What is the formality required by law in contract of chattel mortgage to bind or affect third
persons?
a. That an affidavit of good faith must be appended to the Deed of Chattel of Mortgage and
recorded therewith in the Chattel Mortgage Register.
b. That the contract of chattel mortgage be registered in IPO.
c. That the contract of chattel mortgage be in private instrument.
d. That the contract of chattel mortgage be registered in Registry of Deeds.
92. The following are the important characteristics of contract of chattel mortgage, except
a. Accessory – It cannot exist without a principal obligation or contract of loan.
b. Indivisible – It creates a lien on the whole or all of the properties mortgaged, which lien
continues until the obligation it secures has been fully paid.
d. Real contract – It is perfected by delivery of the personal property mortgaged.
93. The following may become object of chattel mortgage, except

a. Personal property
b. Movable property
c. Intangible assets
d. Real or immovable property
94. Is foreclosure still allowed even if the collateral in contract of chattel mortgage is real property?
a. No because the contract is void.
b. No because the contracting parties are guilty of estoppel.
c. Yes but foreclosure shall be done under chattel mortgage law.
d. Yes but foreclosure shall be done under real estate mortgage law
95. The following are the rules for the place of registration of Chattel Mortgage, except
a. As a general rule, it must be recorded in the Chattel Mortgage Register of the province
where the mortgagee resides.
b. It must be recorded in both Chattel Mortgage Registers of the provinces where the
mortgagor resides and where the property is located.
c. If the mortgagor is domiciled outside the Philippines, the mortgage must be registered in
the Chattel Mortgage Register where the property is located.
d. With respect to motor vehicles, it must be registered with Chattel Mortgage Register
where the mortgagor resides and with Land Transportation Office where the motor
vehicles are recorded.
e. With respect to shares of stock, it must be registered with Chattel Mortgage Register in
the province where the corporation has its principal office and in the Chattel Mortgage
Register of the province of domicile of the mortgagor.
f. With respect to vessel, it must be registered in the office of the Philippine Coast Guard of
the port of documentation of the vessels.
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96. Which of the following statements concerning contract of chattel mortgage is correct?
a. The mortgagee is not obligated to file an independent action for the enforcement of his
credit or loan secured by a chattel mortgage. To do otherwise would defeat the purpose
of the chattel mortgage, which is to give him preference over the mortgaged chattels for
the satisfaction of his credit.
b. A mortgagee who sues and obtains a personal judgment against a mortgagor upon his
credit waives thereby his right to enforce the mortgage securing it and therefore no
longer allowed to foreclose the chattel mortgage.
c. Both A and B
d. Neither A nor B
97. What is the grace period granted to mortgagor or the minimum period required to lapse from the
time of the breach of the condition in Chattel Mortgage before the mortgagee may extrajudicial
sell or foreclose in the public auction the mortgaged property? (Equity of Redemption in Chattel
Mortgage)
a. At least 30 days
b. At least 60 days
c. At least 90 days
d. At least 120 days
98. Is there is right of redemption in contract of chattel mortgage?

a. Yes within a period of one year
b. Yes within a period of three months
c. Yes within a period of six months
d. None
99. When a movable property is foreclosed and sold under Act No. 1508 for Chattel Mortgage, the
public auction sale by a public officer shall be made at the public place of municipality
a. Domicile of mortgagor
b. Location of movable property
c. Domicile of mortgagee
d. Either A or B
100. In extrajudicial foreclosure, sale of foreclosed personal property in contract of chattel

mortgage shall be made in
101. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Chattel
Mortgage is higher than the principal obligation and costs, which is true?
a. The mortgagee may retain the excess in the absence of stipulation to the contrary.
b. The mortgagor is entitled to the excess in the absence of stipulation to the contrary.
c. The mortgagee shall always retain the excess.
d. The mortgagor shall always recover the excess.
102. In case the proceeds of the sale from judicial or extrajudicial foreclosure of Chattel
Mortgage is lower than the principal obligation and costs, which is true?
a. The mortgagee may recover the deficiency in the absence of stipulation to the contrary.
b. The mortgagor shall not pay the deficiency in the absence of stipulation to the contrary.
c. The mortgagee shall always recover the deficiency.
d. The mortgagor shall always pay the deficiency
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103. Indicate the proper order on how the proceeds of sale from judicial or extrajudicial
foreclosure of Chattel Mortgage shall be distributed:
I. Cost of sale.
II. Claim of the person foreclosing the mortgage.
III. Claims of junior encumbrances in the order of their priority.
IV. Mortgagor or his agent.
a. I – II – III – IV
b. I – III – II – IV
c. II – I – IV – III
d. III – II – I – IV
104. It is a contract whereby the creditor acquires the right to receive the fruits of an
immovable of his debtor, with the obligation to apply them to the payment of the interest, if
owing, and thereafter to the principal of his credit.
105. The following are the important characteristics of contract of antichresis, except
a. Accessory – It cannot exist without a principal obligation or contract of loan.
b. Indivisible – It creates a lien on the whole or all of the properties used as collateral,
which lien continues until the obligation it secures has been fully paid.
e. Real contract – It is perfected by the delivery of the thing mortgaged.
106. Which of the following may become the object of contract of antichresis?
a. Immovable property
b. Movable property
c. Both A and B
d. Neither A nor B
107. In contract of antichresis, what shall be the basis of measurement of the fruits in its
application to the interest and principal of the loan?
a. The actual market value of the fruits at the time of the application.
b. The actual market value of the fruits at the time of harvest.
c. The actual market value of the fruits at the time of sale of fruits.
d. The actual market value of the fruits at the time of perfection of the contract of
antichresis.
108. What is the nature of the contract of antichresis?

a. It is a consensual contract perfected by mere consent.
b. It is a real contract perfected by delivery of the real property.
c. It is a formal or solemn contract perfected by the execution of the written instrument
containing the antichretic agreement together with the amount of the principal and
interest of the loan.
109. Who shall be liable to pay the real property taxes and expenses necessary for the repair
and preservation of the real property used as collateral in contract of antichresis?
a. Always antichretic creditor
b. Always debtor
c. Antichretic creditor in the absence of stipulation to the contrary
d. Debtor in the absence of stipulation to the contrary
110. Upon non-payment or default of the antichretic debtor of the principal obligation, may
the antichretic creditor automatically appropriate the real property used as security?
a. No because it is pactum commissorium which is prohibited by law and public policy.
b. Yes because the prohibition against pactum commissorium is not applicable to contract of
antichresis.
c. Yes because it is the right of the creditor.
d. Yes if it is agreed upon by the parties.
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111. Which of the following is not an accessory contract that secures the fulfilment of the principal
contract of loan?
a) Contract of pledge
b) Contract of mortgage
c) Contract of sale
d) Contract of antichresis
112. Which of the following is not a common essential element in the accessory contract of pledge and
contract of mortgage?
a) It is constituted to secure the fulfilment of a principal obligation like a contract of loan.
b) The pledgor or mortgagor is the absolute owner of the thing pledged or mortgaged at the time
of constitution or perfection of the contract of pledge or mortgage.
c) The pledgor or mortgagor has free disposal of the property pledged or mortgaged, and in the
d) When the principal obligation becomes due and the debtor defaulted, the pledged or mortgaged
thing may be foreclosed or sold for the satisfaction of the secured loan.
e) The property pledged or mortgaged must be delivered to the creditor.
113. Which of the following principal obligations may not be secured by the accessory contract of pledge,
mortgage or antichresis?
a) Natural obligation
b) Unenforceable obligation
c) Void obligation
d) All of the above
114. Who may pledge or mortgage his property to secure a principal contract of loan?
a) The principal debtor of the loan
b) Third person interested to the fulfilment of the loan
c) Third person who does not have interest to the fulfilment of the loan
d) Any of the above
115. What is the nature of the accessory contract of pledge, mortgage or antichresis?
a) It is a divisible contract when the secured principal contract of loan is joint.
b) It is an indivisible contract when the secured principal contract of loan is solidary.
c) It is a divisible contract whether the secured principal contract of loan is joint or solidary.
d) It is an indivisible contract whether the secured principal contract of loan is joint or solidary.
116. D borrowed P5,000 cash from C. In order to secure the loan, D pledged delivered a specific watch
P3,000 and a specific ring worth P2,000 to C. D and C agreed that the said watch will only secure
P3,000 of the loan while the said ring will secure the balance of the loan. On the maturity date of
the secured loan, D only paid P3,000 of the loan which C accepted. Which pledged property may D
legally ask from C after such payment?
a) Specific watch
b) Specific ring
c) Both a and b
d) Neither a nor b
117. A and B jointly borrowed P10,000 cash from C. In order to secure the loan, A pledged and delivered
a specific laptop and a specific cellphone. On the maturity date of the secured loan, A paid his share
in the loan of P5,000. Which of the following statements is correct after such payment by A?
a) A may legally ask from C the return of his laptop.
b) B may legally ask from C the return of his cellphone.
c) Both A and B may legally ask from C the return of the laptop and cellphone.
d) Neither A nor B may legally ask from C the return of the laptop and cellphone.
118. It is a a stipulation in a contract of pledge or contract of mortgage whereby the thing pledged or
mortgaged shall automatically become the property of the creditor in the event of non-payment of
the secured debt within the term fixed.
a) Pactum intentionada
b) Pactum consciente
c) Pactum commissorium
d) Pactum redhibitoria
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119. D borrowed P4,000 cash from C. In order to secure the his loan, D pledged and delivered his specific
watch to C. The contract of pledge provides that D has the option to dacion en pago the said watch
to C in full satisfaction of the loan in case the former defaulted in the payment of the loan. At the
maturity date of the loan, D suffered financial difficulty and defaulted in the payment of his loan to
C. This prompted D dacion en pago his pledged watch to C in full satisfaction of the loan. C accepted
the offer made by D. Which of the following statements is correct?
a) The advanced agreement of option to dacion en pago the pledged watch is void because it is
intended to circumvent the prohibition against pactum commissorium.
b) The contract of pledge is void because of the pactum commissorium but the contract of loan
remains to be valid.
c) C becomes the owner of the said watch by virtue of dacion en pago.
d) C must still foreclose and sale the pledged watch in public auction before he can appropriate it
in case it is not sold in at least two public auctions.
120. It is an accessory contract by virtue of which the debtor or third person delivers to the creditor or to
a third person a movable, or instrument evidencing incorporeal rights for the purpose of securing the
fulfillment of a principal obligation with the understanding that when the obligation is fulfilled, the
thing delivered shall be returned with all its fruits and accessions to the pledgor.
b) Contract of chattel mortgage
c) Contract of real estate mortgage
121. Which of the following is not a characteristic of a contract of pledge?

a) Unilateral contract
b) Subsidiary contract
c) Consensual contract
d) Nominate contract
122. Which of the following properties may not be used as collaterals in accessory contract of pledge?
a) Personal property
b) Movable property
c) Incorporeal right
d) Real property
123. How is an agreement to constitute a pledge of personal property perfected?

a) Consensual contract
b) Real contract
c) Solemn contract
d) None of the above
124. Which of the following is not a right of a pledgor in a contract of pledge?

a) To alienate even without the consent of the pledgee the thing pledged
b) To continue to be the owner of the thing pledged unless it is expropriated or sold in public
auction after default by the principal debtor
c) To ask for the return of the thing pledged after the payment of the debt and its interest, with
expenses in a proper case
d) In case of a pledge of animals, to become the owner of the offspring of the animals pledged, all
the offspring shall also subject to the pledge, if there is no stipulation to the contrary
125. If there are reasonable grounds to fear the destruction or impairment of the thing pledged without
the fault of the pledgee, what is the right available to the pledgor?
a) To ask that the thing pledged be judicially or extra-judicially deposited
b) To require that the thing be deposited with a third person
c) To demand the return of the thing pledged, upon offering another thing in pledge, provided the
latter is of the same kind and quality
Mobile : 0927 283 8234
Telephone : (043) 723 8412
126. Which of the following is not an obligation of a principal debtor-pledgor?

a) To pay the debt and its interest, with expenses, in a property case, when they are due
b) To pay damages that the pledgee may suffer by reason of the flaws of the thing pledged, if he
was aware of such flaws but did not advise the pledgee of the same
c) To pay for the expenses which are necessary for the preservation of the thing pledged
d) To pay to the pledgee the value of the offspring of the animal pledged that arises during the
pendency of the contract of pledge
127. Which of the following is not a right of a creditor-pledgee?

a) To retain in his possession the thing pledged until the debt is paid
b) To demand reimbursement of the expenses made for the preservation of the thing pledged
c) To bring actions which pertain to the owner of the thing pledged in order to recover it from, or
defend it against third person
d) To use the thing pledged even if he is not authorized to do so and even when its use is not
necessary of the preservation of the thing
128. Which of the following is not a right of a creditor-pledgee?

a) To select or choose the thing to be sold in public auction in case there are two or more things
pledged in the absence of contrary agreement
b) To collect and receive the amount due if the thing pledged is a credit which becomes due
before it is redeemed, and to apply the same to the payment of his claim
c) To automatically appropriate the thing pledged in case of first default by the debtor in the
payment of secured loan
d) To sell the thing pledged upon default of the debtor in the payment of secured loan
129. Which of the following is not an obligation of a creditor-pledgee?

a) To take care of the thing pledged with the diligence of a good father of a family
b) To be liable for the loss or deterioration of the thing pledged even it is due to a fortuitous event
c) To be responsible for the acts of his agents or employees with respect to the thing pledged
d) To deliver to the debtor the surplus after paying his claim from what he has collected on a
credit that was pledged and which has become due before it is redeemed
130. Which of the following is not an essential formality required for the foreclosure of the thing pledged
in case of default by the debtor in the payment of the loan?
a) It must be by public auction.
b) It must be through a notary public.
c) There must be a notice to the debtor and the owner of the thing pledged, stating the amount
for which the public sale is to be held.
d) There must be a court judgment or court order authorizing the public auction of the thing
pledged.
131. Which of the following is an indirect mode of extinguishing the accessory contract of pledge?
a) Payment of the secured principal contract of loan
b) Return by the pledgee of the thing pledged to pledgor
c) Public sale of the thing pledged regardless of the price
d) Renunciation in writing by the pledgee of the contract of pledge
132. Which of the following direct modes of extinguishment of contract of pledge also extinguishes the
secured principal contract of loan?
I. Return by the pledgee of the thing pledged to the pledgor or owner
II. Renunciation or abandonment in writing by the pledgee of the contract of pledge
III. Public sale of the thing pledged regardless of the price
IV. Appropriation of the thing pledged by the pledgee if the thing pledged is not sold in at least
two public auctions
a) I and II
b) III and IV
c) I, II and III
d) II, III and IV
Mobile : 0927 283 8234
Telephone : (043) 723 8412
133. Which of the following is a valid stipulation in a contract of pledge?

a) A stipulation which provides that the pledge is not extinguished by the return of the thing
pledged
b) A stipulation allowing the automatic appropriation by the pledgee of the thing pledged in case of
default of the debtor
c) A stipulation for the recovery of deficiency in case the proceeds from the sale of the thing
pledged is less than the amount of the obligation
134. In the public sale of thing pledged in a contract of sale, which of the following statements is correct?
a) The pledgee can never recover the deficiency despite stipulation for recovery because any
stipulation for recovery of deficiency is null and void.
b) The pledgee is generally entitled to the excess in the absence of stipulation to the contrary.
c) Both a and b
d) Neither a nor b
135. It is a type of pledge created by operation of law whereby a person has a right to retain a thing
belonging to another until he receives payment of his claim.
b) Legal pledge
c) Conventional pledge
d) Agreed pledge
136. In the public sale of thing retained in a legal pledge, which of the following statements is correct?
a) The creditor may recover the deficiency even if not stipulated.
b) The owner of the property is entitled to the excess even if not stipulated.
c) Both a and b
d) Neither a nor b
137. It is an accessory contract whereby the debtor or third person secures to the creditor the fulfilment
of a principal obligation by subjecting as security or a collateral an immovable property or a real
right over immovable property in case the principal obligation is not complied with at the time
stipulated.
138. Which of the following is not a characteristic of a contract of real estate mortgage?
a) Solemn contract
b) Inseparable contract
c) Contract creating real right
d) Indivisible contract
139. Which of the following mortgage is a mortgage created by the express requirement of a provision of
law?
a) Conventional mortgage
b) Legal mortgage
c) Equitable mortgage
a) Real property
b) Immovable property
c) Real right
d) Personal property
Mobile : 0927 283 8234
Telephone : (043) 723 8412
141. It refers to the remedy available to the mortgagee by which he subjects the property mortgaged to
sale for the satisfaction of the obligation secured when the principal obligation is not paid when due
or when there is any violation of any condition, stipulation or warranty by the mortgagor.
a) Attachment
b) Garnishment
c) Execution
d) Foreclosure
142. It is type of foreclosure made through the filling of a petition in court under Rule 68 of Rules of
Court and availed of when the deed of real estate mortgage does not contain a special power of
attorney (SPA) authorizing the mortgagee-creditor to foreclosure it extrajudicially.
a) Judicial Foreclosure
b) Extrajudicial Foreclosure
c) Legal Foreclosure
d) Conventional Foreclosure
143. It is a type of foreclosure made in compliance with Act No. 3135 (Real Estate Mortgage Law) and
available when there is a stipulation in the mortgage contract that the mortgage may be foreclosed
extrajudicially or when such foreclosure sale is made under a special power of attorney inserted in
the contract of mortgage.
a) Judicial Foreclosure
b) Extrajudicial Foreclosure
c) Legal Foreclosure
d) Conventional Foreclosure
144. It refers to the right of mortgagor to pay the secured principal contract of loan in order to prevent
the foreclosure of the real property mortgaged.
a) Equity of redemption
b) Right of redemption
c) Equity of pre-emption
d) Right of pre-emption
145. It refers to the right of mortgagor to repurchase from the highest bidder the real property
foreclosed.
a) Equity of redemption
b) Right of redemption
c) Equity of pre-emption
d) Right of pre-emption
146. In the foreclosure of the real property mortgaged in a contract of real estate mortgage, which of the
following statements is correct?
a) The mortgagee may recover the deficiency in the absence of stipulation to the contrary.
b) The mortgagor is entitled to the excess in the absence of stipulation to the contrary.
c) Both a and b
d) Neither a nor b
147. Which of the following is a valid stipulation in a contract of real estate mortgage?
a) A stipulation which provides for tipo or upset price or maximum limit of price in the foreclosure
sale of mortgaged real property.
b) A stipulation allowing the automatic appropriation by the mortgagee of the real property
mortgaged in case of default of the debtor.
c) A stipulation prohibiting the mortgagor from disposing or selling his real property mortgaged.
d) A stipulation prohibiting second mortgage on a real property registered under Torrens System
or with Certificate of Title.
Mobile : 0927 283 8234
Telephone : (043) 723 8412
148. It is a conditional sale of personal property as security for the payment of a debt, or the
performance of some other obligation specified therein, the condition being that the sale shall be
void upon the seller paying to the purchaser a sum of money or doing some other act named. If the
condition is performed according to its terms the mortgage and sale immediately become void, and
the mortgagee is thereby divested of his title.
149. Which of the following is not a characteristic of contract of chattel mortgage?

a) Accessory contract
b) Real contract
c) Nominate contract
d) Indivisible contract
a) Incorporeal right
b) Personal property
c) Movable property
d) Real property
151. It is an affidavit attached to a deed of chattel mortgage which states that the parties 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 not one entered into for
purposes of fraud.
a) Affidavit of loss
b) Affidavit of good faith
c) Affidavit of desistance
d) Affidavit of acceptance
152. Where shall the deed of chattel mortgage involving car be registered?
a) Chattel mortgage registry of the province where the mortgagor resides
b) Land Transportation Office where the car is registered
c) Both a and b
d) Neither a nor b
153. Where shall the deed of chattel mortgage involving shares of stocks be registered?
a) Chattel mortgage registry of the province where the mortgagor resides
b) Chattel mortgage registry of the province where the principal office of corporation is located
c) Both a and b
d) Neither a nor b
154. What is the grace period granted by Chattel Mortgage Law to mortgagor from the date of debtor’s
default to pay the secured obligation to prevent the sale of the personal property mortgaged by
paying the defaulted loan?
a) 30 days
b) 60 days
c) 90 days
d) 120 days
155. In the foreclosure of the personal property mortgaged in a contract of chattel mortgage, which of
a) The mortgagee may recover the deficiency in the absence of stipulation to the contrary.
b) The mortgagor is entitled to the excess in the absence of stipulation to the contrary.
c) Both a and b
d) Neither a nor b
156. In which type of accessory contract is foreclosure of collateral allowed to be done in private sale?
b) Contract of mortgage
c) Both a and b
d) Neither a nor b
Mobile : 0927 283 8234
Telephone : (043) 723 8412
157. It is a contract whereby the creditor acquires the right to receive the fruits of an immovable of his
debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to
the principal of his credit. It is a formal contract perfected by the execution of the written instrument
containing the antichretic agreement together with the amount of the principal and interest of the
loan.
158. Which of the following is not a characteristic of a contract of antichresis?

a) Accessory contract
b) Indivisible contract
c) Inseparable contract
d) Consensual contract
159. Which of the following may become the subject matter of contract of antichresis?
a) Patent
b) Farm lot
c) Car
d) Shares of stocks
160. What is the basis for application of the fruits collected from the collateral in a contract of antichresis
to the interest and principal of the secured loan?
a) Actual market value of the fruits at the time of application
b) Actual market value of the fruits at the time of harvest
c) Actual market value of the fruits at the end of the year
d) Average actual market value for the year
161. In the absence of stipulation to the contrary, who shall be liable to pay the real property taxes and
expenses necessary for the repair and preservation of the real property used as collateral in contract
of antichresis?
a) Antichretic debtor
b) Antichretic creditor
c) Both a and b
d) Neither a nor b
-END-
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RFBT03-07 - Law On Pledge, Mortgage and Antichresis

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No. 125 Brgy.

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

Law on Pledge, Mortgage and Antichresis

a. That they be constituted to secure the fulfillment of a principal obligation or

3. Indivisibility of contract of pledge or mortgage or antichresis - The contract of pledge or

5. Contracting parties in contract of pledge

6. Characteristics of a contract of pledge

a. Real – It is perfected by delivery of the subject matter.

7. Essential requisites of conventional pledge or contract of pledge

a. That it be constituted to secure the fulfillment of a principal obligation or contract of

8. Subject matter of a contract of pledge

a. All movable or personal property susceptible of possession.

11. Rights of the debtor-pledgor

12. Obligations of the debtor-pledgor

13. Rights of the creditor-pledgee

14. Obligations of creditor-pledgee

a. It must be by public auction.

18. Modes of extinguishment of a contract of pledge

a. Indirect Mode of Extinguishment

i. When the principal obligation or contract of loan secured by the contract of

b. Direct Modes of Extinguishment of contract of pledge that do not extinguish

i. Return by the pledgee of the thing pledged to the pledgor or owner.

ii. Renunciation or abandonment in writing by the pledgee of the contract of

c. Direct Modes of Extinguishment of contract of pledge that also extinguish the

1. Rule in case of deficiency

a. The pledgee can never recover the deficiency despite stipulation

2. Rule in case of excess

a. The pledgee is generally entitled to the excess in the absence of

19. Null and void stipulations in a contract of pledge

21. Examples of legal pledge

22. Distinctions between Contract of or Conventional pledge and Legal pledge

24. Contracting parties in contract of real estate mortgage

25. Essential requisites of a contract of real estate mortgage

a. That it be constituted to secure the fulfillment of a principal obligation or contract of

26. Important characteristics of real estate mortgage

a. Accessory – It cannot exist without a principal obligation such as contract of loan.

27. Types of real estate mortgage

b. Legal mortgage is one executed pursuant, to an express requirement of a provision of

28. Subject matter of contract of real estate mortgage

a. Immovable property or real property

31. Types of Foreclosure of Real Estate Mortgage

a. Judicial Foreclosure is a type of foreclosure made through the filling of a petition in

i. Equity of Redemption – The judgment debtor/mortgagor has a period of not

ii. Right of Redemption – The judgment debtor/mortgagor is not generally

b. Extrajudicial Foreclosure is a type of foreclosure made in compliance with Act No.

1. Generally within 12 months or 1 year from public sale

2. Exceptionally within 3 months or 90 days from public sale if these two

32. Rules in deficiency or excess in foreclosure of real estate mortgage

a. Rule in case deficiency

b. Rule in case of excess

33. Null and void stipulations in a contract of mortgage

35. Contracting parties in contract of chattel mortgage

36. Essential requisites of contract of chattel mortgage

a. That it be constituted to secure the fulfillment of a principal obligation or contract of

37. Important characteristics Contract of chattel mortgage

a. Accessory – It cannot exist without a principal obligation such as contract of loan.

38. Subject matter of chattel mortgage

a. Movable property or Personal property

41. Rules for the place of registration of Chattel Mortgage

43. Rules in deficiency or excess in foreclosure of chattel mortgage

a. Rule in case of deficiency

b. Rule in case of excess