Pledge Flashcards
What are the essential requisites common to PLEDGE AND MORTGAGE
● Article 2085. The following requisites are essential to the contracts of pledge and
mortgage:
● (1) That they be constituted to secure the fulfillment of a principal obligation;
●(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;
● (3) 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.
● Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (1857)
What is pactum commisorium?
stipulation for an automatic appropriation of the things subject of pledge or mortgage in case of non- payment. - VOID
True or false. The contract of pledge or mortgage cannot secure obligations subject to a suspensive or resolutory condition.
False. The contract of pledge or mortgage may secure all kinds of obligations, be they pure or subject to a suspensive or resolutory condition.
Difference between pledge and mortgage
PLEDGE
Constituted on movables
Property delivered to the pledgee, or
to a third person (Real contract)
Not valid against 3rd persons unless a description of the thing pledged and the date of the pledge appear in a public instrument
MORTGAGE
Constituted on immovables
Delivery is not necessary
Not valid against third persons if not
registered.
What may be the object of a contract of pledge
Article 2094. All movables which are within commerce may be pledged, provided they are susceptible of possession. (1864)
Art. 2095. Incorporeal rights, evidenced by negotiable instruments, bills of lading, shares of stock, bonds, warehouse receipts and similar documents may also be pledged. The instrument proving the right pledged shall be delivered to the creditor, and if negotiable, must be indorsed. (n)
Requisites to affect third persons
Art. 2096. A pledge shall not take effect against third persons if a description of the thing pledged and the date of the pledge do not appear in a public instrument.
What is the Effect if No Public Instrument is Made
When the contract of pledge is not recorded in a public instrument, it is void as against third persons; the buyer of the thing pledged is a third person within the meaning of the article. The fact that the person claiming as pledge
has taken actual physical possession of the thing sold will not prevent the pledge from being declared void insofar as the innocent stranger is concerned (Tec Bi and Co. v. Chartered Bank of India, Australia and China,
16 O.G. 908; Ocejo, Perez and Co. v. International Bank, 37 Phil.631)
What is the care required for the creditor?
Art. 2099. The creditor shall take care of the thing pledged with the diligence of a good father of a family; he has a right to the reimbursement of the expenses made for its
preservation, and is liable for its loss or deterioration, in conformity with the provisions of this Code. (1867)
How is pledge extinguished?
Article 2110
If the thing pledged is returned by the pledgee to the pledgor or owner, the pledge is extinguished. Any stipulation to the contrary
shall be void.
If subsequent to the perfection of the pledge, the thing is in the possession ofthe pledgor or owner, there is a prima facie presumption that the same has been returned by the pledgee.
This same presumption exists if the thing pledged is in the possession of a third person who has received it from the pledgor or owner
after the constitution of the pledge.
Article 2111
A statement in writing by the pledgee that he renounces or abandons the pledge is sufficient to extinguish the pledge.
For this purpose, neither the acceptance by the pledgor or owner, nor the return of the thing pledged is necessary, the pledgee becoming a depositary.
What formalities are required for the sale of the thing
)
(a) The debt is due and unpaid.
(b) The sale must be made with the intervention of a notary public.
(c) The sale must be at a public auction (if at the first, it is not sold,
a second auction must be held with the same formalities).
(d) There must be notice to the pledgor and owner, stating the
amount due.
Rules if the Price At the Sale is More or Less Than the Debt
(a)If the price at sale is MORE – excess goes to the ‘ creditor, unless
the contrary isprovided. (b)If the price is LESS – creditor does NOT get the deficiency. A
contrary stipulation is VOID.
Article 2115. The sale of the thing pledged shall extinguish the principal obligation, whether or not the proceeds ofthe sale are equal to the amount of the principal , obligation, interest and expenses in a proper case. If the price of the sale is more than said amount, the debtor shall not be entitled to the excess, unless it is otherwise agreed. If the price of the sale is less, neither shall the creditor be entitled to recover the deficiency, notwithstanding any stipulation to the contrary. (n)
What is the red it two or more things are pledged?
Article 2119
If two or more things are pledged, the pledgee may choose which he will cause to be sold, unless there is a stipulation to the contrary. He may demand the sale of only as many of the things as are necessary for the payment of the debt.
