RFBT Reviewer – Credit Transactions

PLEDGE REAL ESTATE MORTGAGE CHATTEL MORTGAGE

Requisites of Contract of Pledge and Mortgage:
1. To secure the fulfillment of a principal obligation;
2. Absolute owner of the thing pledged or mortgaged;
Similarities 3. Free disposal of their property.

ACCESSORY CONTRACT: cannot exist without a valid obligation or a principal contract.

AUTOMATIC APPROPRIATION PROHIBITED: PACTUM COMMISSORIUM – VOID: any stipulation is null and void.
The D delivers to the C or to a third person movable or There is no form required to constitute a Personal property is recorded in the Chattel
document evidencing incorporeal rights; the thing contract of real estate mortgage. Mortgage Register as a security for the
Definition
delivered shall be returned with all its fruits and performance of an obligation.
accessions.
1. Real contract – delivery 1. Accessory 1. Accessory
2. Accessory contract – no independent 2. Indivisible 2. Indivisible
3. Unilateral – C, return the thing 3. Inseparable – subj. the property 3. Inseparable
Characteristics 4. Subsidiary – until the fulfillment 4. Real right – enforceable against 4. Formal contract – perfected by the
5. Indivisible – whole or all the 3rd party registration to Chattel Mortgage
6. Nominate – name given by law 5. Consensual – by mere consent Register
6. Nominate 5. Nominate
The thing pledged be placed in the possession of the C, Retained by the mortgagor. If the movable, instead of being recorded, is
Delivery or of a third person by common agreement. delivered to the C or a third party, the contract is a
pledge and not a chattel mortgage.
1. Movable property; 1. Immovables;
Object 2. Incorporeal rights, evidenced by negotiable 2. Alienable real rights in Movables
instruments, etc. accordance with the laws
a. Within the commerce of man and capable of a. A public instrument containing Affidavit of Good Faith: Absence of it does not
possession; the description; affect the validity of the contract, it is only non-
b. If the pledge earns or produces fruits, the C shall b. Recorded in the Registry of binding to third persons who acted in good faith.
compensate what he receives with those which Property.
are owing him. c. The owner is allowed to alienate
Rules c. Unless there is a stipulation, the pledge shall the immovable property
extend to the interest and earnings of the right mortgaged. (Pactum de non-
pledged. aliendo)
d. If animals, their offspring shall pertain to the
pledgor.
e. Unless expropriated, the D is still the owner.
Use of the General rule: The C cannot use the thing pledged,
thing without the authority of the owner.

Exceptions: (1) Authority from the owner and (2) the

RFBT Reviewer – Credit Transactions
preservations require its use.
 Thing pledged is returned by the pledgee. Disposal of the object during the pendency of the
Extinguishmen
 Renunciation or abandonment of pledge, mortgage is considered a criminal act under Art.
t
statement in writing. 319
1. The C to whom the credit has not been satisfied In case of non-payment, notice: Shall be done extrajudicially.
in due time, may proceed before a Notary Public 1. Extrajudicial – not required,
to the sale of thing pledged. unless stipulated Required 10 days prior to sale; posting in two or
2. Sale shall be made at a public auction. 2. Judicial – posting in 3 public more public places 10 days before auction.
3. With notification to the debtor, stating the places at least 20 days prior to
amount for which the public sale is held. sale
Foreclosure
sale  At the public auction, the pledgor or owner may
bid.
 The pledgee may also bid, but his offer shall not
be valid if he is the only bidder.

In a legal pledge – only after 30 days from such demand

may there be foreclosure thereof.
If more than, the D shall not be entitled to the excess, Are more than, the mortgagor shall be Is more than, the excess shall belong to the
unless it is otherwise agreed. entitled to the excess. mortgagor;

If less than, the C shall not be entitled to recover the Are less than, the mortgagee shall be Is less than,
Proceeds
deficiency, notwithstanding any stipulation to the entitled to recover the deficiency. a. General rule: the C is entitled to the
contrary. deficiency
b. Except: if the object is subject of a sale in
installment
No right of redemption. Exists only in Real Estate Mortgage. The There is no right of redemption that exists in a
period to redeem shall depend if the foreclosure of chattel mortgage.
foreclosure is:

1. Extrajudicial:
General rule: 1 year from date of
Redemption
foreclosure
Exception: 3 months from sale or
registration of the certificate of sale,
whichever is earlier.

2. Judicial: 90 to 120 days