Provisions Common to Pledge and Mortgage(PM)

2085. Requisites1. They are created to secure a principal obligation. 2. The pledgor or mortgagor must be the absolute owner of the thing.3. Persons constituting pledge or mortgage must have a free disposal of thing or have legal authority.

Note: Characteristics:1. Real - perfected by delivery of thing2. Accessory- cant stand on its own. It follows principal.3. Unilateral- obligation of creditor to return thing upon fulfilment of principal obligation.4. Subsidiary-

2087. When principal obligation becomes due, creditors may ALIENATE the thing. (alienate-foreclosure; not disposal)

2088. Creditors cant appropriate/dispose/sell thing. Stipulation to contrary is null and void, and this is known as pactum commissorium.

2089. Pledge or mortgage is considered indivisible even though debt may be divided. If debtors heir paid part of debt, there is no partial release/extinguishment of pledge or mortgage until it is fully paid. Creditors heir who received his share of debt cant return the thing or cancel mortgage. Exception: Partial release of obligation is possible when each of the thing guarantees only a determinate portion of the obligation.

2090. Pledge and mortgage is still indivisible even if obligation is joint or solidary.

2091. PM can secure all kinds of obligations (voidable or unenforceable)(pure or subject to suspensive or resolutory condition)

2092. A promise to create PM, gives rise only to personal right or personal action bet parties and no real right in property.

PLEDGEpledgor-debtor pledgee-creditor2093. Requisites1. 20852. Thing must be placed in possession of creditor. (actual & continuous possession.)

Properties that may be pledged2094. Movables within commerce of man & susceptible of possession2095. Incorporeal rights evidenced by documents

2096. Form to take effect against third parties Public Instrument-notarize for authentication Dated and with Description of thing

2097. With consent of pledge, pledgor may alienate thing. The ownership is passed to buyer but pledge remains in possession.

2098. Creditor had the right of retention or right to retain thing until obligation is paid.

2099. Creditor must take care of thing with diligence of good father. He can seek reimbursement for expenses made for its preservation. He is liable for loss or deterioration if it was due to fraud, negligence, delay or violation of contract terms. He is not liable if due to fortuitous event.

2100. Pledgee cant deposit thing with a third person, unless stipulated. He will be responsible for acts of his agents or employees with respect to thing.

2102. Income, Fruits , Dividends, Interests Belong to owner or pledgor May be applied as payment of obligation Offspring of animals included in the pledge

2103. Expropriation of thing pledged (will be used for public purpose) Debtor remains owner Pledgee has right against claims of third persons.

2104. Pledgee cant use the thing pledged unless There is an agreement. Theres a need to use thing for purposes of its preservation. (car) In cases of misuse by pledgee, pledgor may ask for judicial/extrajudicial deposit.(pledgee-pay damages)

2105. Debtor cant ask the return of thing until he has paid his debt, interests & expenses for its preservation.

2106. Thing is in danger of lost or impaired due to pledgees negligence, pledgor may require it to be deposited with third person. (Similar to 2104.)

Without pledgees fault, there are reasonable grounds to fear destruction or impairment of thing, Remedies: 2107. Right of pledgor to demand return of thing and substitute it with another that is of same kind & quality.2108. Right of pledge to have thing sold at public sale; Proceeds will be the security. (This right is more superior to 2107.)2109. Creditor was deceived by the substance and quality of thing. Creditors Remedies are: Claim another thing Demand immediate payment

2110. If thing is returned by pledgee to pledgor, then pledge is extinguished. Stipulation to contrary is void.If pledgor or a third party is in possession of thing, presumption is pledge is already extinguished.

2111. Written Renunciation/Abandonment Pledge is extinguished. Pledgee becomes a depositary.

2112-2115 Remedy for Non-payment of Obligation Notification to debtor (demand?) Notarial Auction or Auction Sale conducted by notary public (residence of pledge) Mode of payment in bidding: In cash and in full

Anyone can participate in the bidding. ( pledgor, pledge or public). No minimum amount of bid. Pledgor will be preferred if he has the same offer as the highest bidder. If pledgee is the only bidder, it is a failed bid.

If 1st and 2nd Biddings were failed, thing will be awarded to pledgee. He is obliged to give aquittance for his entire claim. Extinguishment: Sale of thing to Highest Bidder Excess: given to pledgee unless agreed otherwise Deficiency: Pledgee may not collect; stipulation to contrary is void.

2116. Pledgee must inform pledgor of the results fo bidding.

2117. A third person who has any right in or to the thing may pay for the obligation once it becomes due and creditor cant refuse payment.

Real Mortgagemortgagor-debtor mortgagee-creditor

2124. Properties: Immovables Alienable real rights

2125. Requisites:1. 20852. Document recorded in Registry of Property to affect third parties

2126.

2127. Extent of MortgageMortgage extends to all its accessions, improvements, growing fruits, income. To exclude them, there must be an express agreement.

2128. Mortgage credit may be alienated or assigned to a third person, in whole or in part.

2129. Creditor may claim from possessor of property the payment of the credit secured.

2130. Stipulation forbidding owner from alienating the immovable is void.

Conjugal Property was mortgage by either husband & wife. The contract of mortgage is void. Before Family Code (Aug. 1, 1988), contract is voidable. Sale of property co-owned by X & Y(50-50), half valid and half void.

Consideration involved the one in the principal contract Agreement bet. Borrower and third party Liberality Gratuitous

Mortgage-security for a loan obligation Secure present obligation Dragnet Clause/All inclusive clause- subsumes obligations of past and future origins (valid). Also, known as a Blanket Mortgage. Must include this clause in registration.

Remedy for Non-payment of Obligation1. Judicial Foreclosure2. Extra-Judicial Foreclosure- Act. 3135

Foreclosure sale of property at public auction and apply proceeds to satisfy claim of creditor.

Foreclosure auction sale conducted by eithera) notary publicb) court sheriff

choice of mortgagee anybody can participate no minimum bid/no required bidders

Mortgagor/owner has the same bid with another-rebidding-one who has the higher bid

Php100,000-only bidder=php10.00 (can award unconscionably low bid)-failed bid-taken on a case to case basis

Practice: half the price & less=too low

-If the mortgagee is the only bidder, it will be awarded to him.

-TIPOUpset Price (Void)-fixed amount agreed upon by the parties to be the bid amount during foreclosure.

Excess-given to mortgagor/owner-automatic-stipulation to contrary is void90(10)-creditor can still collect from borrower/debtor

Pledge-extinguishment of obligationBuyer at Auction-becomes the owner-no recovery

Highest bidder-will be given Certificate of Sales (CS/COS)-will only obtain absolute ownership

REDEMPTION Period-acquire bulk of property

-Register CS/COS-one year redemption from date of registration of COS-No registration-no absolute owner

Highest Bidder-no right to refuse redemption as long as mortgagor pays the whole redemption amount

After 1 year RP, Highest bidder will become absolute ownerAfter 1 year, Right to Redeem becomes legally extinct, FUNCTUS OFICIO (repurchase)

Repurchase-absolute owner may sell property at any amount

Mortgagor-judicial person; corporationXXX Corp.-Section 47 of general banking law-The redemption period shall be until but not after the registration of COS which in no case, shall be 3 months from foreclosure, auction sale, whichever is earlier.Jan. 20 auction saleJan. 21 CS registration (stop the right to redeem)

April 20- 3 monthsApril 21-Commercial land

Mortgagee/creditor is Rural Bank2 rights of mortgagor-a redemption period is 2 years from registration of COS (certificate of sales or COS)-owners/heirs of property, 5 years to repurchase after 2 years

Redemption-right (Highest bidder bound by redemption price + expenses)Repurchase- absolute owner; may sell at any amount; may sell or not

Judicial Foreclosure-court process-Regional Trial Court (RTC) issue order regarding balance, requiring borrower to pay-at least 90 daysAfter lapse of period,-sold through auction-no minimum bidder-no minimum bid-anyone can participate

Failed bid-unconscionably lowCS-higher bidderExcess-mortgagorDeficiency-collect

After auction, go to court & get order of confirmation-purposes for court to determine the regularity of auction sale

-Register with Registrar of Deeds-Highest bidder becomes absolute owner-No Right of Redemption

Equity of Redemption-can always be exercise as long as the court hasnt issued order of confirmation

Exception-Right of Redemption can be exercise if: Mortgagee is a bank or financial institution (lends money) Within 1 year from registration of CS/order (certificate of sale)

Chattel MortgageRequires (1)2085 (2)chattel mortgage register

Not registered(1)valid between contracting parties(2)against third parties null & void(3)affidavit of good faith -declaration by mortgagor that the mortgage is a security for a particular obligation -just & valid

Properties Covered-Movables (416)Not applicable-dragnet clause-incomeHouse-immovable-estoppel-valid between contracting parties-no need to physically deliver the thing

Remedies(1)Extrajudicial ForeclosureAct No. 1508-no minimum bidder -no minimum bid price -anyone can bid -failed bidExcess-mortgagorDeficiency-can collect from borrower

Highest bidder is given a Certificate of Sales (CS)-becomes the absolute owner-no right of redemption

AntichresisRequirements(1)2085(2)writing(3)void if not in writingProperty-immovable-fruits/income/interest

Remedies(1)Pay(2)Court-Sale(Auction) Follow Rule on Judicial Foreclosure

Loan 1933Commodatumcontract of sale-nonconsummableBailor-person delivering nonconsummable -movable/1937 personal; immovable or real -no transfer of ownershipSimple loan (Mutuum)-money or other tangible things-contract of consumption-movables/personal-ownership transferred-tangible-sack of rice

RES Peret DominoBailor-make use of it and return it later on delivery Bailee-replace it with same kind & qualityConsummables-for display or exhibition

Deposit 1962-safekeeping-same object

Bank deposit-simple loan (Mutuum)-give the bank money

Credit, discount

1935,1936,1937,1938 Commadatum1939 Personal contract cant lend or lease -it is possible that the members of bailees household may use it; unless theres stipulation to contrary

Extinguished death of bailor or baileeGratuitous-free -consideration

How long will bailee use thing?-agreement of parties

LoanCommodatum-use-real or personal-gratuitous-period -duration is silentContract of precarium 1947 tolerated -bailor can demand for its return at anytime

Expenses1.Ordinary-Bailee should pay expenses2.Preservation-no reimbursement Extraordinary-bailee & bailor (50%/50%0Car-daily (day to day) expenses-change of machine-shared equally by bailor & bailee

Right of Retention 1944-may be exercised by bailee to hold on to the thing until he is reimbursed

Mutuum 1954-1955-can you return in kind?No-borrow money-pay in legal tender (foreign currency)-unless agreed upon

Tangible-same kind & qualityRegardless of value

If its impossible to deliver the same kind, its value at the time of the perfection of loan shall be paid

1956 payment of interest-possible if it is in writing and agreed upon by parties-unconscienable, the courts may reduce the same-silent about interest rate=legal interest rate (6% per year)-may be simple or compounded silent:use simple

Solution IndebiteBorrower paid interest even though theres no needCredit card contract of credit-no delivery of thing-deferred payment

Deposit-real contractDepositDepository-person responsible for safekeeping-may cover real & personal property-no transfer of ownership-depositor need not be the owner

*Depository may only use thing for purpose of preserving it and safekeeping*If depositor allows use of thing, it may be some other contract (no longer a deposit)

2 General Kinds 19641.Judicial - Court2.Extrajudicial-by virtue of agreement a)voluntary-real contract of parties;theres a need to delivery thing b)necessary

Voluntary 1969-oral or written (any form)

1970Depositor incapacitated-return the thing to the guardian

1971Depository if incapacitated-return it-recover the amount of benefit from the depositoryA------D-------X (bad faith)-liable for damages

Standard case-diligence of a Good Father1265 Civil Code-presumption that the one in possession is responsible for its loss unless...

-founded on trust & confidence-1975 safety deposit box-control between bank & person (2 keys)

The use is incidental or secondary

1995 Extinguishment(1)Expiration of period(2)Precarium (demand at will)(3)Mutual withdrawal(4)(5)Fulfillment of purpose of deposit

Necessary/Involuntary 1996(1)Calamities

1998-obligation of hotelkeepers or inn liable for loss, deterioration(1)traveller gives notification of the things he is bringing (declaration)(2)follow precautionary measures of the hotel-vehicles parked, jewelry2000-20022000 Outsider/strangerArmed/uses irresistible force-hotel is not liable-fortuituous event

2002 Ousider/stranger-visitor of guest

2004Sell things of guests if they dont pay-seek judicial authority first

EstafaGuaranty 2047Guarantor-subsidiary -when debtor cant pay, creditor can go against guarantorInsurer of solvencyGuarantyB/O ---- CGuarantor can guarantee less than or equal the amount

Contract of surety-guarantor is bound as the debtor-creditor can immediately collect from him

Benefit of discussion-creditors must first exhaust the assets/properties of debtors or collectibles-guarantor can refuse to payCreditors cant avail of excussionRenunciation (waiver, no properties, bankcrupt, surety)UselessSolidaryInsolvencyAbscond

Guarantor pays creditor 2066-seek reimbursementT-total amount of debtI-InterestE-expensesD-damages if any

2071S-SuedI-Insolvent (Debtor)P-Period elapse & debtor has yet to payE-Expiration of termT-Ten years lapseA-AbscondsI-Imminent Insolvency

PledgeReal Estate MortagageChattel Mortgage

1. ObjectPersonal or movable Real or immovable and Alienable real rightsPersonal or movable

2. Parties(debtor-creditor)Pledgor-PledgeeMortgagor-MortgageeMortgagor-Mortgagee

3. Registration/RecordingPublic Instrument- dated and with descriptionRegistry of Deeds/PropertyNeed an Affidavit of Good Faith and Chatter Mortgage Registrar

4. Right to sellCant be sold without consent of pledgeeCant be sold without consent of creditor (must be in writing and annotated on instrument.)Can be sold even without consent of mortgagee

5. Effect of SaleExcess: Creditor is entitled unless otherwise agreed.Deficiency: Creditor cant recover.Excess: Creditor is not entitled.Deficiency: Creditor can recover.Excess: Creditor is not entitled.Deficiency: Creditor can recover.

6. ForeclosureNotarial AuctionJudicial & ExtrajudicialExtra-Judicial