A pledge or mortgage is indivisible even though the
PLEDGE, MORTGAGE, AND
ANTICHRESIS
Common requisites of pledge, mortgage, and antichresis
1. Constituted to secure the fulfillment of a principal
obligation
Principal obligation must be a valid
obligation; however, they may secure:
o All kinds of obligations
o Voidable, unenforceable, or
natural obligations
2. Mortgagor must be the absolute owner of the thing
mortgaged
Pledge or mortgage constituted on future
property is void
Third person pledgers and mortgagors can
be held liable only to the extent of the
value of their property
3. Person constituting the mortgage must have the free
disposal of his property
Free disposal: property being given in
pledge or mortgage is free from claims or
encumbrances
When thing pledged or mortgages may be sold or alienated to
pay debt
Before maturity
o Cannot be sold or alienated unless the pledger
or mortgagor fails to fulfill certain conditions
At maturity
o May be sold or alienated to pay the creditor
Appropriation of the thing pledged or mortgaged
In pledge: allowed only if the thing pledged is not
sold at 2 public auctions
In mortgage: no case allowed
Pactum commissorium: stipulation in a pledge or
mortgage which provides for automatic forfeiture;
void
o Elements:
There should be a property
mortgaged to secure principal obl
Stipulation for automatic
appropriation in case of
nonpayment within stipulated
period
o Stipulation that the pledgee or mortgagee
may purchase the thing pledged or
mortgaged at its current price if the debt is
not paid on time is valid
Indivisibility of pledge and mortgage
debt may be divided among the successors in
interest of the debtor or of the creditor
Indivisibility among heirs of debtor
o Debtor who paid cant ask for proportionate
extinguishment as long as debt is not
completely satisfied
Indivisibility among heirs of creditors
o Paid heir cannot return the pledge or cancel
mortgage to the prejudice of the unpaid heirs
o Exception: pledge or mortgage is divisible if
several things are given in pledge or mortgage
and each one of them guarantees only a
determinate portion of the credit.
Promise to constitute pledge or mortgage
Gives rise only to a personal action between the
contracting parties
Until the mortgage has been executed, no real right on
the property is created.
Pledge
Requisite specific to pledge
Thing pledged be placed in the possession of the creditor
or of a third person by common agreement
o Without delivery, the pledge is void
Kinds of pledge
Conventional/ voluntary: agreement of the parties
Legal: operation of law
Object of pledge
All movables
Incorporeal rights
o If negotiable, must be endorsed
Forms of pledge
Between parties
o May be in any form
o Delivery of the obj is sufficient to bind the parties
As regards third persons
o Must be in a public instrument
Extent of pledge
1. The thing pledged
2. Fruits, income, dividends or interest earned or produced
by the thing pledge, unless otherwise stipulated
3. The offspring when the thing pledged is an animal, unless
otherwise stipulated
Rights of the debtor/pledgor
1. To alienate the thing pledged with the consent of the
pledgee
2. To ask that the thing pledged be jud or extra-jud
deposited if it is used without authority or for a purpose
other than for its preservation
 3. To continue being the owner of thing pledged, unless b. If an extension of time is granted to the debtor
expropriated by the creditor w/out his consent
4. To ask for the return of the thing pledged after he has c. If he cannot be subrogated to the rights,
paid the debt and interest mortgages, and preferences of the creditor
5. To require that the thing pledged be deposited with a
third person if it is in danger of being lost or impaired Extinguishment of pledge
through the negligence of the pledgee Indirect cause: pledge is extinguished when the principal
6. To demand the return of the thing pledged upon offering obligation is extinguished
another thing in pledge provided the latter is of the same Direct cause
kind and quality o Return of the thing pledged
Any stipulation that the pledge is not
Obligations of the debtor/pledgor extinguished by the return of the thing
1. Pay the debt, interests, and expenses is void
2. Pay damages that the pledgee may suffer o Renunciation or abandonment in writing by the
pledgee
Rights of the creditor/pledgee Acceptance of the pledger is not
1. To retain in his possession the thing pledged until the necessary
debt is paid Pledgee becomes a depositary upon
2. To demand reimbursement of the expenses made for the renunciation if the thing pledged is not
preservation of thing pledged yet returned to the owner
3. To bring actions which pertain to the owner of the thing o Sale of thing pledged
pledged in order to recover/defend it against third persons Formalities
4. To use the thing pledged if he is authorized to do so, or By public auction
when its use is necessary for the preservation of the thing Through a notary public
5. If deceived of the substance of the thing pledged: W notice to the debtor &
a. Claim another thing be given to replace the owner of the thing pledged
initial thing pledged Who may bid at the public auction
b. Demand immediate payment of the princ obl Pledger or owner
6. To cause the sale of thing pledged at a public sale if there Pledgee
is a danger of destruction or impairment without his fault Third persons
7. To collect & receive the amount due if the thing pledged is Required amount of bids
a credit which becomes due before it is redeemed & to All bids shall offer to pay the
apply the same to the payment of his claim purchase price at once
8. To sell the thing pledged upon default of debtor Effect of sale
Princ obl shall be
Obligations of the creditor/pledgee extinguished whether or not
1. Take care of thing pledged w the dil of a good father the proceeds of the sale are
2. To be liable for the loss or deterioration of the thing equal to the amount of the
pledged unless due to fortuitous event princ obl, int, and expenses
3. Not to deposit the thing pledged to a third person, unless o Appropriation of the thing pledged
authorized
4. To be responsible for the acts of his agents or employees Legal Pledge
w respect to the thing pledged Right of a person to retain a thing until he receives
5. Not to use the thing pledged, except when payment of his claim
a. He is authorized by the owner
b. Use of the thing is necessary for preservation Examples of legal pledge
6. To deliver to the debtor the surplus after paying his claim 1. Possessory lien by a possessor in good faith
from what he has collected on a credit that was pledged May retain the movable upon which he has
incurred necessary & useful expenses, until he
Rights of a third person who pledges his property has been reimbursed therefor
1. To be indemnified by the debtor if he pays the creditor 2. Possessory lien of worker
2. To be subrogated to all the rights of the creditor against 3. Depositarys right of retention
the debtor if he pays the creditor
3. To be released from liability in the ff cases: Rules applicable to legal pledge
a. Creditor voluntarily accepts immovable or other Same as on conventional pledge except with:
property in payment of the debt
 o The thing may be sold only after demand of
the amount for which the thing is retained Form of real mortgage
o Public auction shall take place w/in one month Between parties: any form
after such demand o Binding even if not registered in the
o If without just grounds and the public sale is Registry of Property, but must be in public
not held within such period, debtor may ask instrument for the convenience of the
for the return of the thing parties
o After payment of debt & expenses, remainder As regards third persons: must be recorded in the
of the price of sale shall be delivered to the Registry of Property
obligor
Stipulation prohibiting alienation & second mortgage
Conventional pledge vs legal pledge Stipulation forbidding the owner from alienating the
Conventional Legal pledge immovable mortgaged shall be void
pledge Second mortgage
excess amount belongs to the remainder of the o Incident of ownership: mortgagor may
creditor price of sale shall exercise second mortgage even w/out the
be delivered to the consent of the mortgagee
obligor Spanish Mortgage Law
deficiency not entitled to entitled to recover o Torrens System: mortgagor must get the
recover deficiency the deficiency consent of the mortgagee

Special laws on pawnshops & similar establishments Foreclosure of real mortgage

Governed primarily by the special laws & regulations
concerning them & subsidiarily by the provisions of
pledge in the Civil Code
Real Mortgage
Requisite specific to real mortgage
Document in which the mortgage appears be
recorded in the Registry of Property
Characteristics of a real mortgage
1. Accessory: cannot exist without a principal obligation
2. Indivisible: subsists as long as the principal obligation
remains unpaid
3. Inseparable: subjects the property upon which it is
imposed to the fulfillment of the obligation for whose
security it was constituted
Third persons liability is limited to the value
of the property mortgaged
4. Real right: mortgagee has a right to have the
mortgaged property sold to satisfy his claim
5. Real property
Kinds of real mortgage
Conventional/ voluntary mortgage: agreement of the
parties
Legal mortgage: express requirement of a provision
of law
Equitable mortgage: shows the intention of the
parties to charge a real property as a security for a
debt and contains nothing contrary to law
Object of real mortgage
Immovables
Alienable real rights imposed on immovables
Remedy available to the mortgagee by which he
subjects the property mortgaged to the satisfaction
of the obligation secured
Grounds
o Principal obl not paid when due
o There is a violation by the mortgagor
Kinds
o Judicial foreclosure: made through the filing
of petition in court
Tipo/ upset price: price which is
set by the parties as the amount
at which the property will be sold
at public auction; void
o Extra-judicial foreclosure
Proceeds of sale shall be distributed as follows
o Costs of sale
o Claim of the person foreclosing the mortgage
o Claims of junior encumbrances
o Balance shall be paid to the mortgagor
Creditor may recover deficiency from the principal debtor
Redemption: transaction through which the mortgagor
reacquires or buys back the value of the title which may
have passed under the mortgage
o Equity of redemption: after his default in the
performance of this obligation but before the
property is sold
Judicial foreclosure: not less than 90
days to pay the mortgage debt before
the property is sold
Extra-judicial foreclosure: after his
default but before the sale
o Right of redemption: within a certain period
after it was sold for the payment of the
mortgage debt
 Judicial foreclosure: after the sale and o Claim of the person foreclosing the mortgage
before the confirmation by the court o Claims of junior encumbrances
of the sale Creditor may recover deficiency from the principal debtor
Extra-judicial foreclosure: one year exc for a chattel mortgage sold at a price payable in
from the date of registration of the installments
sale to redeem the property
Pledge vs real mortgage
Real mortgage vs sale with right to repurchase Pledge Real Mortgage Chattel
Real mortgage Sale with right to mortgage
repurchase movables immovables movables
security for a principal not a security for an thing is required to thing is not thing is not
obligation obligation be delivered to the required to be required to be
no transfer of ownership transfer of ownership upon creditor or a third delivered to the delivered to the
delivery person creditor creditor
no transfer of possession property is transferred to the must be in a must be must be
buyer a retro public instrument registered to registered &
indivisible redemption may be partial redemption showing desc of take effect accompanied by
only to real property both real and personal thing pledged and against third an affidavit of
property date of pledge to persons good faith to
bind third persons take effect
Chattel Mortgage against third
Requisite specific to chattel mortgage persons
Document in which the mortgage appears be deficiency (in deficiency can be deficiency can be
recorded in the Chattel Mortgage Register conventional) recovered recovered except in
cannot be case of personal
Object of chattel mortgage recovered even if property sold in
Only personal property stipulated installments
excess (in excess belongs excess belongs
Form of chattel mortgage conventional) is to the to the
Between the parties: must be recorded in the Chattel retained by the mortgagor even mortgagor even
Mortgage Register (CMR) of the province where the pledgee unless if not stipulated if not stipulated
mortgagor resides & where the property is located if there is a
diff stipulation to give
o Place of registration excess back to the
Motor vehicles: CMR & LTO pledgor
Shares of stocks: CMR pledgee may mortgagee mortgagee cannot
Vessel: Office of the Collector of appropriate the cannot appropriate the
Customs thing pledged if appropriate the thing mortgaged
As regards third persons: affidavit of good faith not sold in two thing mortgaged
appended to the Deed of Chattel Mortgage and public auctions
recorded in the CMR
o Affidavit of good faith: sworn statement Real mortgage vs chattel mortgage
attesting to the fact that the mortgage is Real mortgage Chattel mortgage
made for the purpose of securing the immovables movables
obligation specified in the conditions must be registered to bind must be accompanied by an
third parties affidavit of good faith to take
Foreclosure of chattel mortgage effect against third parties
Grounds may secure future obligations cant secure future obligations
o Principal obl not paid when due
o There is a violation by the mortgagor Criminal liability in pledge or mortgage
Kinds 1. Persons guilty of estafa
o Judicial foreclosure a. Pretends to be the owner of any real
o Extra-judicial foreclosure property
Proceeds of sale shall be distributed as follows b. Knows that real property is encumbered but
o Costs of sale still disposes of the same as unencumbered
 2. Persons who shall knowingly remove any personal Remedies
property mortgaged under the Chattel Mortgage Law o Petition to the court for the payment of debt
to its location without the written consent of the o Sell the immovable
mortgagee Debtor can recover deficiency
3. Mortgagor who shall sell personal property already
pledged without the written consent of the
mortgagee written on the back of the mortgage and
noted on the record in the office of the Register of
Deeds

Antichresis
A contract whereby the creditor reacquires the right
to receive the fruits of an immovable of his debtor
with the obligation to apply them to the payment of
the interest and thereafter to the principal of his
credit

Characteristics of antichresis
1. Accessory
2. Formal
Amount of principal and interest must be in
writing; otherwise, the antichresis is void
3. Nominate
4. Real right
5. Real property
6. Indivisible

Requisite specific to antichresis

Amount of principal and interest must be in writing;
otherwise, the antichresis is void

Measure of application of fruits

Actual market value of the fruits at the time of
application thereof to there interest & principal

Obligations of the creditor

1. Pay taxes & charges upon the immovable, unless
there is a stipulation to the contrary
2. Bear the expenses necessary for its preservation and
repair

Application of the fruits of the immovable

1. Taxes and charges upon the immovable
2. Expenses for preservation and repair
3. Interest on the principal obligation
4. Principal obligation

When debtor can reacquire enjoyment of property

1. Upon full payment of his obligation to the creditor
2. When he is compelled by the creditor to enter into
the enjoyment of the property

Effect of non-payment of the debt within the period

Creditor does not acquire ownership of the
immovable for nonpayment. Stipulation to the
contrary is void.