4 - CREDIT TRANSACTIONS Flashcards
What are the essential elements of pledge or mortgage as stated in Article 2086?
The essential elements are:
- They must secure the fulfillment of a principal obligation.
- The pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged.
- They must have free disposal of their property, or be legally authorized to dispose of it.
What types of obligations can pledge or mortgage secure?
Pledge or mortgage can secure:
A. Pure obligations
B. Conditional obligations (resolutory or suspensive)
C. Obligations with a term (resolutory or suspensive)
D. Natural obligations
E. Rescissible obligations
F. Voidable obligations
G. Unenforceable contracts
Note: They cannot secure a void obligation or contract.
Can a third person pledge or mortgage their property to secure another’s obligation?
Yes, third persons may secure the principal obligation of another by pledging or mortgaging their own property.
What happens if the principal is due and remains unpaid?
The pledged or mortgaged property may be sold at public auction, but the creditor cannot appropriate it.
What is “pactum commissorium”?
Pactum commissorium is an automatic appropriation of the pledged or mortgaged property by the creditor, which is void.
Under what conditions can a creditor appropriate the pledged property?
A creditor may appropriate the pledged property if:
- There is a subsequent voluntary act of the debtor (dacion en pago).
- If there were two unsuccessful public auctions of the pledged property.
Explain the indivisibility principle in pledge or mortgage.
Pledge or mortgage is indivisible; the entire debt must be paid before the pledge/mortgage can be released. However, if multiple items are pledged or mortgaged, partial extinguishment may be allowed under certain conditions.
Provide an example that illustrates the indivisibility of a pledge.
If D owes C ₱300,000 and pledges three properties (1, 2, 3), D cannot ask for the release of property 1 upon paying ₱100,000. Even if D dies, the indivisibility remains unless there’s an agreement specifying portions for individual properties.
What is the definition of a pledge?
A pledge is when the debtor delivers movable property or instruments evidencing incorporeal rights to the creditor or a third person to secure the fulfillment of a principal obligation.
What are the characteristics of a pledge?
Characteristics include:
- Real: Perfected by delivery.
- Accessory: No independent existence.
- Unilateral: Obligation arises solely for the creditor.
- Subsidiary: Obligation does not arise until the principal obligation is fulfilled.
- Indivisible: Creates a lien on all pledged properties until full payment.
- Nominate: Has a specific name.
Is a pledge consensual?
No, a pledge is not consensual; it is perfected by delivery, not mere consent.
What is a legal pledge?
A legal pledge is the right of a person to retain a thing until they receive payment for a claim.
What is the required form to bind the parties involved in a pledge?
No specific form is required for parties; however, a public instrument is required to bind third persons and must include a description of the pledged item.
What happens if the debt is due and not yet satisfied?
The creditor-pledgee may sell the pledged thing at public auction or private sale (if authorized), providing notice to the debtor of the amount due.
If the proceeds from a public auction are less than the principal obligation, what happens?
The principal obligation is extinguished, and the creditor cannot recover the deficiency, even if there is a stipulation to the contrary.
What defines a contract of real estate mortgage?
It is a contract whereby the debtor or a third person secures the creditor by subjecting immovable property or real rights over immovable property to the satisfaction of the obligation in case of non-compliance.
What are the characteristics of a real estate mortgage?
Characteristics include:
- Accessory: No independent existence.
- Indivisible: Creates a lien on all mortgaged properties.
- Consensual: Perfected by mere consent.
- Subsidiary: Obligation arises only upon the fulfillment of the principal obligation.
- Unilateral: Obligates the creditor to return the property upon payment.
What is the requirement to bind third persons in a real estate mortgage?
It requires both a public instrument and registration in the Registry of Property.
Can the owner of mortgaged property sell it?
Yes, the owner may alienate the mortgaged property, but any stipulation forbidding this is void.
What is foreclosure in the context of real estate mortgage?
Foreclosure is the remedy available to the mortgagee to subject the mortgaged property to satisfy the obligation when the principal obligation is not paid.
Explain the two kinds of foreclosure.
- Judicial Foreclosure: Initiated by filing a petition in court; the mortgagor has a right to redeem the property within a specific time frame post-judgment.
- Extrajudicial Foreclosure: Allowed only if there is a stipulation in the mortgage contract; the right of redemption varies depending on whether the mortgagor is a natural or juridical person.
What happens in case of excess or deficiency in foreclosure?
- Excess: Mortgagor is entitled to the excess unless stated otherwise in the mortgage agreement.
- Deficiency: Mortgagee may recover the deficiency unless specified otherwise.
What is a chattel mortgage?
It is a contract where personal property is recorded in the Chattel Mortgage Register as security for the performance of an obligation.
What are the characteristics of a chattel mortgage?
Characteristics include:
A. Formal: Perfected by registration in the Chattel Mortgage Register.
B. Indivisible: Creates a lien on all properties pledged until the obligation is paid.
C. Accessory: Has no independent existence.
D. Nominate: Has a specific name.
E. Inseparable: Subjects the property to the obligation regardless of who possesses it.
What is required to bind third persons in a chattel mortgage?
Registration in the Chattel Mortgage Register plus an Affidavit of Good Faith is required.
What must an Affidavit of Good Faith state?
It must state that:
A. The mortgage is for securing the obligation and for no other purpose.
B. The obligation is just and valid.
C. The mortgage is not entered for fraudulent purposes.
What happens if the mortgagor sells the mortgaged property?
They may be held criminally liable under Article 319 of the Revised Penal Code for removal of mortgaged property.
Discuss the need for form in a chattel mortgage.
Proper registration is crucial to validate the mortgage and allow for enforcement through foreclosure.
What are the rules regarding excess or deficiency in foreclosure of chattel mortgages?
- Excess: Mortgagor entitled to any excess in the absence of a stipulation.
- Deficiency: The mortgagee cannot recover deficiency under the “in recto” (real contract) law.
Compare the definitions of pledge, real estate mortgage, and chattel mortgage.
A. Pledge: Delivery of movable property as security for a debt.
B. Real Estate Mortgage: Granting of a lien on immovable property as security for a debt.
C. Chattel Mortgage: Granting of a lien on movable personal property as security for a debt.
What is the main difference in possession between real estate and chattel mortgage?
In a real estate mortgage, the debtor retains possession; in a chattel mortgage, the debtor also retains possession of their personal property.
What is required for foreclosure in a chattel mortgage compared to a real estate mortgage?
Chattel mortgages typically allow for extrajudicial foreclosure, while real estate mortgages can have either judicial or extrajudicial foreclosure depending on provisions in the contract.
