RFBT 04.

LAW ON CREDIT TRANSACTIONS

TOPIC OUTLINE:
1. Similarities between pledge, real mortgage and chattel mortgage
a. Requisites
b. Indivisibility
c. Pactum Commissorium
d. Third party pledgors/mortgagors
2. Pledge
3. Real Estate Mortgage
4. Chattel Mortgage
5. Distinctions

SIMILARITIES BETWEEN PLEDGE, REAL MORTGAGE AND CHATTEL MORTGAGE

a. REQUISITES
Must be complied with in order to have a valid contract.
1. Fulfillment of a principal obligation
Accessory contract – dependent on existence of a principal obligation.
2. Absolute ownership
3. Free disposal
b. INDIVISIBILITY
1. The debtor’s heir who has paid of the debt cannot ask for the proportionate
extinguishment of the pledge or mortgage as long as the debt is not completely
satisfied.
2. Neither can the creditor’s heir who received his share of the debt return the pledge or
cancel the mortgage, to the prejudice of the other heirs who have not been paid.
c. PACTUM COMMISSORIUM
VOID – 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.
d. THIRD PARTY PLEDGORS / MORTGAGORS
Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property.

PLEDGE
Is a contract by virtue of which the debtor delivers to the creditor or to a third person movable (Art. 2094)
or document evidencing incorporeal rights (Art. 2095) for the purpose of securing the fulfilment of a
principal obligation with the understanding that when the obligation is fulfilled, the thing delivered shall
be returned with all its fruits and accessions.
 There is a delivery requirement
 Movable or document evidencing incorporeal rights.
 It is an accessory contract, real contract, unilateral, subsidiary.

Delivery – in addition to the essential requisites of contracts of pledge or mortgage common to them, it is
necessary, in order to constitute the contract of pledge, that the thing pledged be placed in the possession
of the creditor, or of a third person by common agreement.
 Essential requisites of Pledge
o Consent
o Cause
o Object
o Delivery – requirement for the purpose of perfection.

KINDS OF PLEDGE
RFBT 04. LAW ON CREDIT TRANSACTIONS

1. Voluntary or Conventional – created by agreement of partners

2. Legal – created by operation of Law.

CHARACTERISTICS OF A CONTRACT OF PLEDGE

1. REAL CONTRACT – perfected by the delivery of the thing pledged
2. ACCESSORY CONTRACT – no independent existence of its own
3. UNILATERAL – creates an obligation solely on the part of the creditor to return the thing
4. SUBSIDIARY – obligation incurred does not arise until the fulfilment of the principal obligation
which is secured.

CAUSE OR CONSIDERATION
1. PLEDGOR / DEBTOR – the principal obligation
2. PLEDGOR NOT THE DEBTOR – gratuitous, mere liberality, compensation stipulated,

OBJECT
1. Movable Property
2. 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.

LEGAL PLEDGE
1. Pledge created by operation of Law
2. Sold only after demand
3. One month

REAL ESTATE MORTGAGE

OBJECT
Only the following property may be the object of a contract of mortgage:
1. Immovables;
2. Alienable real rights in accordance with the laws, imposed upon immovables.

FORM
There is no form required to constitute a contract of real estate mortgage.
- Consensual Contract
- Delivery is not a requirement (not a real contract)

EXTENT OF COVERAGE
EXTENT: the mortgage extends to:
1. The natural accessions
2. The improvements
3. Growing fruits
4. The rents or income not yet received when the obligation becomes due
5. To the amount of the indemnity granted or owing to the proprietor
a. From the insurers of the property mortgaged
b. In virtue of expropriation for public use, with the declaration, amplifications and
limitations established by law, whether the estate remains in the possession of the
mortgagor, or it passes into the hands of a third person.