Learning Activities

PACTUM COMMISSORIUM
This is a stipulation in a pledge or mortgage which provides for automatic
forfeiture (that ownership of the thing pledged or mortgaged shall pass to
the creditor by the mere default of the debtor.
“Article 2088. The creditor cannot appropriate the things given by way of
pledge or mortgage, or dispose of them. Any stipulation to the contrary is
null and void.”
 

The elements of pactum commissorium, which enables the

mortgagee/pledgee to acquire ownership of the mortgaged/pledged
property without the need of foreclosure proceedings are:
1) There should be property mortgaged or pledged by way of security for
the payment of the principal obligation, and 
2) There should be a stipulation for automatic appropriation by the creditor
of the thing mortgaged/pledged in case of non-payment of the principal
obligation within the stipulated period.
 

The stipulation is void for being contrary to morals and public policy. The
creditor is  only allowed to move for the sale of the thing pledged or
mortgaged after the principal obligation becomes due in order to collect the
amount of his/her claims from the proceeds. The stipulation however, that
the pledgee/mortgagee may purchase the thing pledged/mortgaged at its
current price if the debt is not paid on time is valid. The pledgee or
mortgagee may also bid at the public auction of the things pledged or
mortgaged.
 

CASES:
Sps. Ong vs Roban Lending Corp. (Links to an external site.)
Philnico Industrial Corp. vs Privatization and Management Office  (Links to an
external site.)