Art.

2085 - requisites to contracts of pledge and mortgage:

1. That they be constituted to secure the fulfillment of a principal obligation (cannot exist without a valid obligation);
2. That the pledgor or mortgagor be absolute owner of the thing pledged or mortgaged (otherwise thing pledged or
mortgaged is void, future inheritance cannot be pledged or mortgaged);
3. That the persons constituting the pledge or mortgage have free disposal of their property, and in the absence
thereof, that they be legally authorized for the purpose (act of strict ownership);
4. Thing pledged or mortgaged may be alienated (cr does not automatically become the owner of the thing)

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own
property.

Pledge:
- A contract (real-perfected by delivery, accessory-no independent existence of its own, unilateral-obligation solely on
the part of the cr to return the thing, subsidiary-does not arise until the PO is secured)
- Debtor delivers to the creditor or to a third person a movable or instrument
- Purpose of securing the fulfillment of a principal obligation
- That when the obligation is fulfilled, the thing shall be returned with all its fruits and accessions.

Pledge vs Mortgage

PLEDGE MORTGAGE

Constituted on movables Immovables

Property is delivered to the pledgee, or by common Mortgage delivery is not necessary

consent to a third person

Not valid against third persons UNLESS a description of Not valid against third persons if not registered
the thing pledged and the date of the pledge appear on
the public instrument

Pledgor can sell the thing pledged with the consent of Can sell the property mortgaged even without the
the pledgee consent of the mortgagee

Art. 2088 - prohibition against PACTUM COMMISSIORIUM

1. If the dr fails to comply with the obligation at due, cr may move for the sale of the thing pledge with formalities of
the law
2. The crs cannot appropriate nor dispose the thing pledged
3. Stipulation authorizing automatic appropriation by cr is null and void for being pacto comisorio
4. A stipulation whereby the thing shall be automatically become the property of the cr in the event of non payment
within term fixed is FORBIDDEN BY LAW, and declared NULL AND VOID
5. Stipulation does not affect the contract and remains valid
6. XPN: voluntary cession or sale of property
Art. 2093 - PLEDGE

Requisites:
1. Art. 2085
2. Thing pledged be placed in possession of the creditor, or of a 3rd person by common agreement (transfer of
possession)

Art. 2104
Right of pledgor to ask that thing pledged be deposited judicially or extrajudicially:
1. If the creditor uses the thing without authority;
2. If he misuses the thing in any other way;
3. If he thing is in danger of being lost or impaired because of negligence or willful act of the pledgee.

Art. 2107
Requisites for the application of Art 2107
1. The pledgor has a reasonable grounds to fear the destruction or impairment of the thing pledged;
2. There is no fault on the part of the pledgee;
3. The pledgor is offering in place of the thing another thing in pledge which is of the same kind and quality as the
former;
4. The pledgee does not choose to exercise his right to cause the thing pledged to be sold at public auction.

2 remedies granted by Art 2107 to the pledgor

1. Right to demand the return of the thing pledged upon offering another thing of the same value and quality;
2. Right to cause the same to be sold at a public sale.

Art 2109
2 remedies to the pledgee, in case he is deceived as to the substance or quality of the thing pledged:
1. To claim another thing in pledge;
2. To demand immediate payment of the principal obligation.

Art. 2112
Right of the pledgee to cause sale of the thing pledged:
1. Debt is due and unpaid
2. Sale must be at a public auction
3. There must be notice to the pledgor and owner, stating the amount due
4. The sale must be made with the intervention of notary public

Art. 2124 - Real Mortgage

Object of RM:
1. Immovables (real property)
2. Alienable rights in accordance with laws, imposed upon immovables (buildings)

Mortgage:
- A contract (accessory)
- The debtor secures to the creditor the fulfillment of a principal obligation (subjecting to security)
- In case the principal obligation is not complied with at the time stipulated
Art. 2125 - essential requisites of mortgage
1. Art. 2085
2. Notarized/appear in public document duly recorded in the Registry of Property

Doctrine of mortgagee in good faith

1. Reliance in GF on certificate of title of mortgage - mortgagee has no obligation to undertake further investigation
absence suspicion on the face of the title, hence entitled to protection
2. GR: purchaser is not required to explore further than what the Torrens Title upon its face indicates
3. XPNS: 1. Purchaser has knowledge of the defect in title; 2. Mortgagee not directly deals with the owner; 3. He was
aware of sufficient facts to induce a reasonable prudent man to inquire into the status of the property; 4. Mortgagee
a bank (required to observe higher standard of diligence and care

Art. 2131

Foreclosure
- remedy available to the mortgagee
- He subjects the mortgaged property to the satisfaction of the obligation to secure which the mortgage was given
- Through the sale of the property by PUBLIC AUCTION
- Proceeds thereof to the payment

Kinds of Foreclosure
1. Judicial Foreclosure - by bringing an action for that purpose in the RTC of the place where the property is located;
must be published on notice; GR that the mortgagor cannot exercise his right of redemption AFTER THE SALE is
confirmed
2. Extrajudicial Foreclosure - where the same is stipulated in the contract; clause giving the mortgagee the power upon
default of he debtor, to foreclose the mortgage by an extrajudicial sale

Redemption
Mortgagor-owner reacquires or buys back the property within a certain period and for a certain amount after his default

Kinds of Redemption
1. Equity - right of the mortgagor to redeem before the sale
2. Right of redemption - right to redeem within the period after it was sold for the satisfaction of the mortgage debt

Art 2132 - def of Antichresis

Antichresis vs Pledge

ANTICHRESIS PLEDGE

Refers to real property Personal property

Consensual contract, perfected by mere consent Real contract, perfected by the delivery of the thing
pledged
Antichresis vs RM

ANTICHRESIS REAL MORTGAGE

Property is delivered to the creditor Debtor usually retains possession of the property

Creditor acquires the right to receive the fruits of the Creditor does not have any right to receive the fruits
property

Creditor, unless stipulated in the contrary, is obliged to Creditor has no such obligation
pay the taxes and charges upon the estate

Art. 2140 - Chattel Mortgage

CM vs Pledge

CHATTEL MORTGAGE PLEDGE

Delivery of the personal property to the mortgage is Delivery is necessary

not necessary

The registration of the same in the Chattel Mortgage Registration in the Registry of Property is not necessary
Registry is required by law

Property is foreclosed, the excess goes to the debtor If property is sold, the debtor is not entitled to the
excess unless otherwise agreed

Property is foreclosed and there is deficiency, the If property sold, and there is deficiency, the creditor is
creditor is entitled to recover the deficiency from the not entitled to recover
debtor

XPN: if the CM is a security for the purchase of

personal property in installments

Similarities between CM and Pledge:

1. Executed to secure performance of a principal obligation;
2. Constituted only on personal property;
3. Indivisible;
4. Constitute a lien on the property;
5. Creditor cannot appropriate the property to himself in payment of the debt;
6. Debtor defaults, the property must be sold for the payment of the creditor;
7. Extinguished by the fulfillment of the principal obligation or the destruction of the property pledged or mortgaged

AFFIDAVIT OF GOOD FAITH

- an oath in a contract of CM wherein the parties “severally swear that the mortgage is made for the purpose of
securing the obligations specified in the conditions thereof and for no other purposes, that the same is just and valid”

Application of the proceeds of sale:

1. Costs and expenses of keeping and sale
2. Payment of the obligation secured by the mortgagee
3. Claims of persons holding subsequent mortgages in their order
4. The balance, if any, shall be paid to the mortgagor, or person holding under him
Right of Redemption
1. When the condition of a CM is broken the ff may redeem
a. The mortgagor
b. Person holding subsequent mortgage
c. Subsequent attaching creditor
2. Attaching creditor who so redeems shall be subrogated to the rights of the mortgagee and entitled to foreclose the
mortgage
3. Redemption is made by paying or delivering to the mortgagee the amount due on such mortgage