ST.

SCHOLASTICAS COLLEGE
READING AID IN PLEDGE AND MORTGAGE
ATTY. MARY ANN R. SAGANA
PLEDGE - a contract by virtue of which the debtor or a third person delivers to the creditor or to a
third person a movable or document 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 the fruits and accessions.

Characteristics:
a. accessory
b. real
c. unilateral

Kinds:
a. voluntary or conventional
b. legal

PLEDGE

REAL MORTGAGE
CHATTEL MORTGAGE
1. accessory contract
2. pledgor/mortgagor must be absolute owner of property pledged/mortgaged
3. pledgor/mortgagor must have free disposal or be authorized
4. thing pledged/mortgaged may be alienated when principal obligation becomes due for
payment
5. 3rd persons NOT parties may be the pledgor/mortgagor
6. can secure pure, conditional, natural obligations, voidable and unenforceable contracts
7. indivisible
1. Real contract
1. Consensual contract
1. Consensual contract
2. constituted on movables
2. constituted on immovables 2. constituted on movables
3. property is delivered to 3. delivery is not necessary
3. delivery is not necessary
rd
pledgee/3 person
4. not valid against 3rd 4. not valid against 3 persons 4. Registration in Chattel
persons unless a description if not registered
Mortgage
Register
is
of the thing pledged and the
necessary for validity
date of the pledge appear in
public instrument
5. Debtor not entitled to 5. If property is foreclosed, 5. If property is foreclosed,
excess unless otherwise the excess over the amount the excess over the amount
agreed or except in case of due goes to the debtor
due goes to the debtor
legal pledge
6. Creditor not entitled to 6. If property is foreclosed 6. If property is foreclosed
deficiency notwithstanding and there is deficiency, and there is deficiency,
stipulation to the contrary
creditor is entitled to creditor is entitled to
recover the deficiency from recover the deficiency from
the debtor
the debtor
Pactum commissorium
- a stipulation whereby the thing pledged or mortgaged or under
antichresis shall automatically become the property of the creditor (appropriation of
the thing) in the event of non-payment of the debt within the term fixed. Such
stipulation is null and void.
RIGHTS OF THE PLEDGOR:
1. To continue to be the owner of the thing pledged, until its sale, unless it is expropriated
2. To demand the deposit of the thing pledged should the creditor use it without authority, or
misuse it in any other way
3. To substitute the thing pledged if it is endangered without fault of the pledgee without
prejudice to pledgee's right to have the thing sold at public sale
4. To bid and have preference at the foreclosure sale if he should offer the same terms as the
bidder
5. To demand the return of the thing pledged upon the extinction of the principal obligation
RIGHTS OF THE PLEDGEE:
1. To retain the thing in his possession or in that of a third person to whom it has been delivered,
until the debt is paid
2. To be reimbursed for expenses incurred in its preservation
3. To compensate (set-off) the fruits, income, dividends, or interests earned or produced by the
thing pledged and received with those which are due to him
4. To bring the actions which pertain to the owner of the thing pledged in order to recover it from,
or defend it against a third person

5. To sell the thing pledged at public auction, if without his fault, there is danger of destruction,
impairment or diminution in the value of the thing
6. To claim a substitute or demand immediate payment, if he is deceived in the substance or
quality of the thing pledged
7. To sell the thing pledged at public auction if the obligation secured is not paid
8. To bid at the public sale
9. To collect the amount that becomes due on a credit pledged before such credit is redeemed
10. To choose which one of several things pledged shall be sold
OBLIGATIONS OF THE PLEDGOR:
1. To notify the pledgee of any flaw or defect of the thing pledged known to him; otherwise, he
answers for damages suffered by the pledgee
2. To reimburse the pledgee for expenses made for its preservation
3. To fulfill his principal obligation.
OBLIGATIONS OF THE PLEDGEE:
1. To take care of the thing pledged with the diligence of a good father of a family
2. To answer for its loss or deterioration in the proper case
3. Not to deposit the thing pledged with a third person unless authorized
4. To be responsible for the acts of his agents or employees with respect to the thing pledged
5. Not to use the thing pledged unless authorized or its preservation so requires
6. To advise the pledgor or owner in case of sale at public auction of the result thereof
7. To return the thing pledged when the principal obligation is paid.
EXTINGUISHMENT OF PLEDGE:
1. return of the thing pledged to the pledgor
2. statement in writing by the pledgee that pledge is renounced or abandoned
3. public sale of the thing when credit was not satisfied in due time
Rules:
a. the pledgee has the right to sell the thing pledged in an auction sale done through a
notarial act
b. the pledgor/owner may bid at public auction
c. the pledgor will be preferred over other highest bidders offering the same terms
d. the pledgee can bid but if he is the only bidder the bid is not valid
exception: failure to sell the thing after 2 auction sales
effect: the thing will be appropriated in favor of the pledgee
IMPORTANT: after the foreclosure sale the obligation is extinguished whether or not the
proceeds of the sale is sufficient to cover the debt secured. Contrary stipulation is always
VOID.
4. destruction or loss of the thing pledged
5. extinction of the principal obligation by payment
6. other causes of extinguishment of ordinary obligations
MORTGAGE - a contract whereby the debtor secures to the creditor the fulfillment of a principal
obligation, especially 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.
Characteristics:
Object of mortgage:
1. real right
1. immovables
2. accessory contract
2. alienable real rights upon immovables
3. indivisible
3. movables chattel mortgage
4. inseparable
5. real property
6. limitation on ownership
7. can secure all kinds of obligations
8. property cannot be appropriated
9. lien
NOTE:

Future property cannot be the object of a contract of mortgage

Contract of mortgage must appear in a public document duly recorded in the Registry of Property
in order to bind third persons
Registration is not a requirement for the validity of the contract or alienation or assignment of the
mortgage
Stipulation forbidding the owner from alienating the immovable mortgaged shall be void
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