1.

TO RETAIN THE THING UNTIL DEBT IS PAID

RIGHT OF RETENTION
2. TO POSSESS THE THING
3. TO BE REIMBURSED FOR THE EXPENSES
MADE FOR THE RETENTION OF THE THING
4. TO APPLY FRUITS, INTERESTS, OR
EARNINGS TO THE INTEREST OR EXPENSES
OWING HIM, IF ANY, THEN TO THE
PRINCIPAL DEBT
SETTING OFF FRUITS OR INTERESTS
RULE ON EXTENT OR SCOPE OF PLEDGE;
EXCEPTION

RIGHT OF PLEDGEE TO COMPENSATE

EARNINGS OF PLEDGE WITH DEBT
5. LEGAL SUBROGATION
RIGHT OF PLEDGEE AGAINST THIRD
PERSONS

LEGAL SUBROGATION
6. TO SELL AT PUBLIC AUCTION
AUCTION SALE WHERE OBLIGATION IS NOT
DUE YET

PROCEEDS OF SALE; STATUS

7. OPTION TO DEMAND REPLACEMENT OR
IMMEDIATE PAYMENT OF DEBT
DECEPTION OR MISREPRESENTATION ON
THE SUBSTANCE AND QUALITY OF THE
THING PLEDGED
A) TO DEMAND FROM THE PLEDGOR AN ACCEPTABLE SUBSTANCE OF THE
THING; OR
B) TO DEMAND THE IMMEDIATE PAYMENT OF THE PRINCIPAL OBLIGATION.
8. TO APPROPRIATE THE THING IN CASE OF
FAILURE OF SECOND PUBLIC AUCTION
RIGHT OF PLEDGEE WHEN DEBT HAD NOT
BEEN SATISFIED IN DUE TIME
PROCEDURE—

A) THE OBLIGATION MUST BE DUE AND UNPAID;

B) THE SALE OF THE THING PLEDGED MUST BE AT A PUBLIC AUCTION;
C) THERE MUST BE NOTICE TO THE PLEDGOR AND OWNER STATING THE
AMOUNT FOR WHICH THE SALE IS TO BE HELD;
D) THE SALE MUST BE CONDUCTED BY NOTARY PUBLIC.
RIGHT, NOT AN OBLIGATION, TO CAUSE SALE
OF THING PLEDGED

RIGHT OF PLEDGEE TO APPROPRIATE THING

PLEDGED
PACTUM COMMISSORIUM, WHEN ALLOWED

ACQUITTANCE
9. TO BID AT PUBLIC AUCTION
WHO CAN BID?
10. TO COLLECT AND RECEIVE AMOUNT DUE
ON CREDIT PLEDGED
RULE WHEN WHAT HAS BEEN PLEDGED IS A
“CREDIT”
11. TO CHOOSE WHICH OF SEVERAL THINGS
PLEDGED WILL BE SOLD
WHEN TWO OR MORE THINGS ARE
PLEDGED; RULE

RESTRICTION
12. TO RETAIN EXCESS VALUE IN THE PUBLIC
SALE
EXCESS OR SURPLUS
13. TO RETAIN THING UNTIL AFTER FULL
PAYMENT OF THE DEBT
14. TO OBJECT THE ALIENATION OF THE
THING
ARTICLE 2097
• ALTHOUGH THE PLEDGEE OR THE ASSIGNEE LITTON DID NOT IPSO FACTO
BECOME THE CREDITOR OF PRIVATE RESPONDENT MENDOZA, THE PLEDGE
BEING VALID, THE INCORPOREAL RIGHT ASSIGNED BY TAN IN FAVOR OF
LITTON CAN ONLY BE ALIENATED WITH DUE NOTICE TO AND CONSENT OF
LITTON OR HIS DULY AUTHORIZED REPRESENTATIVE. TO ALLOW THE
ASSIGNOR TO DISPOSE OF OR ALIENATE THE SECURITY WITHOUT NOTICE
AND CONSENT OF THE ASSIGNEE WILL RENDER NUGATORY THE VERY
PURPOSE OF A PLEDGE OR AN ASSIGNMENT OF CREDIT.
•FAILING IN THIS, THE ALIENATION OF THE LITIGATED
CREDIT MADE BY TAN IN FAVOR LITTON BY WAY OF A
COMPROMISE AGREEMENT WITH MENDOZA DOES NOT
BIND THE ASSIGNEE LITTON. PRIVATE RESPONDENT
MENDOZA ACTED IN BAD FAITH WITH ASSIGNOR TAN SO
AS TO DEFRAUD LITTON IN ENTERING THE COMPROMISE
AGREEMENT
ART. 2118
•IF A CREDIT HAS BEEN PLEDGED BECOMES DUE BEFORE IT IS
REDEEMED, THE PLEDGEE MAY COLLECT AND RECEIVE THE
AMOUNT DUE. HE SHALL APPLY THE SAME TO THE PAYMENT OF HIS
CLAIM, AND DELIVER THE SURPLUS, SHOULD THERE BE ANY, TO
THE PLEDGOR.
•THE COURT ALSO NOTED THAT THE PLEDGE WAS
FILLED OUT IRREGULARLY – IT WAS NOT NOTARIZED
AND CITIBANK’S COPY BORE NO DATE.
PLEDGE MUST BE EMBODIED IN A PUBLIC
INSTRUMENT TO AFFECT THIRD PERSONS
WHERE THE FOLLOWING ENTRIES MUST APPEAR:
•1. A DESCRIPTION OF THE THING PLEDGED; AND
•2. STATEMENT OF DATE WHEN THE PLEDGE WAS EXECUTED.
• UNLESS THESE MATTERS ARE REFLECTED IN THE CONTRACT OF PLEDGE,
INNOCENT THIRD PERSONS WHO MAY HAVE TRANSACTED WITH THE PLEDGOR
INVOLVING THE THING MAY VALIDLY CLAIM A BETTER RIGHT THAN THE PLEDGEE
EVEN IF THE LATTER HAS ALREADY TAKEN POSSESSION THEREOF.
• RATIONALE BEHIND THE REQUIREMENT—TO FORESTALL FRAUD, BECAUSE A
DEBTOR MAY ATTEMPT TO CONCEAL HIS PROPERTY FROM HIS CREDITORS WHEN
E SEES IT IN DANGER OF EXECUTION BY SIMULATING A PLEDGE THEREOF WITH AN
ACCOMPLICE.
• EFFECT OF UNDATED CONTRACT OF PLEDGE—CANNOT RIPEN INTO A VALID
PLEDGE.