Provisions Common to Pledge and Mortgage
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Pledge Mortgage...
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CREDIT CREDIT TRANS TRANSACT ACTION IONS S
CHAPTE CHAPTER R 10PROV 10PROVIS ISION IONS S COMMON COMMON TO PLEDGE AND
MORTGAGE
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INTRODUCTION The The Civi Civill Code Code provi provisi sion ons s on mort mortga gage ge subscribe to the Lien Theory under which the mortgage takes only a lien on property. property. The mortgage mortgage is not, not, as a rule rule entitl entitled ed to possession. In pledge, the encumbrance is created upon delivery.
b . Tha t the p le ledger o r mor tg tg ag agor b e the absolute absolute owner of the the thin thing g pled pledge ged d or mortgaged. c. That That the person persons s constitu constitutin ting g the pledge pledge or mort mortga gage ge have have the the free disposal of their their property property and in their absence thereof, thereof, that they be legally authorized to the purpose. The following reuisites applies also on anichresis. o 2. WHO MAY MAY PLEDGE PLEDGE OR MORTGAG MORTGAGE E (O-F-A-S) (O-F-A-S) !. The pledgo pledgorr or mortgago mortgagorr must be the the owner. o In a decided case by the "C, it held that he who is not the owner of the property pledged pledged or mortgaged to guarantee guarantee the fulllment of an obligation, cannot legally constitute constitute such guaranty as may validly bind the property in favor of his creditor and the pledgee pledgee or mortgag mortgagee ee in such such case acquires no right whatsoever in the property pledged or mortgaged 2 #. The The pledgo pledgorr mortg mortgago agorr must must have free disposal of the property to be pledged or mortgaged. $. If the pledg pledgor or or mortgag mortgagor or does not not have have free free dispos disposal al of the prope propert rty y, he must be legally authorized to authorized to do so. %. &e must not sue suerr from from any any inca incapa paci city ty or disqualication provided disqualication provided by law.
PROVISIONS1 Art!"# 2$%&. T'# ""*+, r#/t#/ 0r# #//#+t #//#+t0 0"" t t'# t'# !+tr !+tr0! 0!t/ t/ "#, "#,# # 0+ 3rt,0,#: 1. T'0t t'#4 t'#4 0r# !+/t !+/ttt# tt# t /#!r# /#!r# t'# "5""3#+t 0 r+!0" 6",0t+. 2. T'0t T'0t t'# t'# "#, "#,#r #r r 3rt, 3rt,0, 0,r r 6# t'# t'# 06/"t# *+#r t'# t'+, "#,# r 3rt,0,#. 7. T'0t T'0t t'# t'# #r/ #r/+/ +/ !+/t +/ttt tt+, +, t'# t'# "# "#,# ,# r 3rt 3rt,0 ,0,# ,# '08# '08# t'# t'# r## r## //0" t'#r r#rt4 0+ + t'#r 06/#+!# 06/#+!# t'#r# t'#r#99 t'0t t'0t t'#4 6# "#,0"" "#,0""4 4 0t'r# t t'# r/#. T'r T'r #r/ #r/+ +/ / *' *' 0r# 0r# +t +t 0rt 0rt# #/ / t t'# t'# r+!0" 6",0t+ 304 /#!r# t'# "0tt#r 64
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A. ACCOMODATION MORTGAGE o The debtor himself or a third person 'who is not a party to the obligation( ma mortgage or pledge his property to secure the obligation of the debtor. It is not reuired reuired that that the third person person benet beneted ed from the principal contract. o )n accommodation mortgagor is not himself a recipient to a loan.
REQUISITE S C OM OMMON TO PLEDGE MORTGAGE: (S-A-F) a. That they are constituted to secure the fulllment of a principal obligation.
1Article 2052. A guaranty cannot exist without
a valid obligation. Nevertheless, a guaranty may be constituted to guarantee the performance of a voidable or unenforceable contract. t may also guarantee a natural obligation.
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!alibo "r. v !A, #$ No. 12052%, 2& "anuary 2001.
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CHAPTER 10PROVISIONS COMMON TO PLEDGE AND
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In a decided case by the "C, it was held that it is not necessary that the accommodation mortgagor be appraised beforehand of the entire amount of the loan nor it should be determined before the execution of the S! in favor of the debtor ". *specially true when the words used by the parties indicate that the mortgage serves a continuing security for credit obtained as well as future loan availments. •
7. COMMON FEATURES PLEDGE MORTGAGE R#0" S#!rt4 +hen the principal obligation becomes due, o the things in which the pledge or mortgage consists may be alienated for the payment of the creditor C+/#r0t+ o The consideration is the principal obligation o ebtor- the consideration of his obligation to pay is the eistence of debt o The consideration for the accessory contract and the principal obligation is the same. o In the case of #entral $an% v #!, it was held that the fact that the mortgagor eecuted the real estate mortgage no consideration was present because the bank had not yet released the loan, does not make he real estate mortgage void for lack of consideration. The consideration in a mortgage may be either a prior or subseuent matter. +hen the consideration is subseuent to the mortgage, the
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()( $amos v *bispo, #$ No. 1&'%0+, 2 -ebruary 201'
mortgage can take e/ect only when the debt secured by it is created as a binding contract to pay. +hen there is partial failure of consideration, the mortgage becomes unenforceable only up to the etent of such failure. The mortgage cannot be enforced more than the actual sum due. R#0" R,'t 0eal right is the power belonging to the o person over a specic thing without a denite passive sub1ect against whom such right may be eercised. o 2ledge or mortgage is a real right of security. A!!#//r4 o The principal obligation may be valid and binding even if the pledge or mortgage is not binding. o The mortgage or pledge is not binding when the principal obligation is void. o The pledge or mortgage are mere incidents to the debt. "eparated from the d eb t the mortgage has no determinative value. o The transfer of debt carries with it the mortgage. The purchaser of note secured by a chattel mortgage may act as the mortgagee3s agent and to do whatever he could have done to enforce the mortgage. o +hatever discharges the debt discharges the mortgage unless there be an agreement to the contrary. o If by special agreement the assignment of
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CHAPTER 10PROVISIONS COMMON TO PLEDGE AND
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debt is not accompanied by the assignment of the mortgage, the mortgage is etinguished. C)"*4 $arach &otors v 'steva( The mortgage-creditor assigned the debts evidenced by promissory note to a $rd party. The transfer does not include the transfer of the mortgage. 5nder the agreement, the mortgagee retained the mortgage while the third party received the promissory notes. "ubseuently, the third party sued the debtor based on the notes and the mortgagee foreclosed the property. 05LI674 The Court ruled that the foreclosure proceeding was nulled. The mortgage ceased to eist because there was no debt in which it could be attached 8CT0I6*4 Ther e ca n be no separation of the notes and the mortgage. +hile the third party can sue upon the notes, it is not allowed that there can be both the foreclosure and a suit on notes. ;. SECURED O#% "tipulation that confers a power of sale upon the mortgage or foreclose the same etra1udicial is valid. 0)TI84 It is not in contravention with public order, public policy or good morals because the debtor epressly agrees upon such manner of making payment. •
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Art!"# 2$%?. A "#,# r 3rt,0,# / +8/6"#9 #8#+ t',' t'# #6t 304 6# 8# 03+, t'# /!!#//r/ + +t#r#/t t'# #6tr r t'# !r#tr. T'#r#r# t'# #6tr@/ '#r *' '0/ 0 0 0rt t'# #6t !0++t 0/ r t'# rrt+0t# #Bt+,/'3#+t t'# "#,# r 3rt,0,# 0/ "+, 0/ t'# #6t / +t !3"#t#"4 /0t/5#. N#t'#r !0+ t'# !r#tr@/ '#r *' '0/ r#!#8# '/ /'0r# t'# #6t r#tr+ t'# "#,# r !0+!#" t'# 3rt,0,#9 t t'# r#!# t'# t'#r '#r/ *' '08# +t 6##+ 0. + Article 1%2. Fr3 t'#/# r8/+/ / #B#!t# t'# !0/# + *'!'9 t'#r# 6#+, /#8#r0" t'+,/ ,8#+ + 3rt,0,# r "#,#9 #0!' +# t'#3 ,0r0+t##/ +"4 0 #t#r3+0t# rrt+ + t'# !r#t.
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CHAPTER 10PROVISIONS COMMON TO PLEDGE AND
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;. The rule on indivisibility does not apply when each of the several things given in mortgage guarantees only a determinate portion of the credit. >. The indivisibility is present even if the debtors a re 1ointly liable. =. If the creditor dies , an heir cannot etinguish the pledge or mortgage to the pre1udice of the other heirs. The rule of indivisibility of a mortgage which respect to the heirs applies only when there are several heirs:
Art!"# 2$?1. T'# !+tr0!t "#,# r 3rt,0,# 304 /#!r# 0"" +/ 6",0t+/9 6# t'#4 r# r /6#!t t 0 r#/"tr4 r //#+/8# !+t+. Art!"# 2$?2. A r3/# t !+/tt t# 0 "#,# r 3rt,0,# ,8#/ r/# +"4 t 0 #r/+0" 0!t+ 6#t*##+ t'# !+tr0!t+, 0rt#/9 *t't r#!# t t'# !r3+0" r#/+/6"t4 +!rr# 64 '3 *' #r0/ 0+t'#r 6 #r+ + "# # r 3rt 0 # 0/
1. INDVISI. 2B sued bank to enforce her right against the property. =. 2B refused to surrender her title contending that she has undivided interest over the portion of the land and the same was not a/ected by the foreclosure and subseuent sale to 2 Aank. &*L4 2B3s argument is 68T correct. o "ale or transfer cannot a/ect or release a mortgage. ) purchaser is necessarily bound to acknowledg e and r esp ec t the encumbrance to which it is sub1ected the purchased thing and which is at
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disposal of the creditor in order that he may recover the amount of credit therefrom. The mortgage subsist even if there is change in the ownership. The last transferee is 1ust as much of a debtor as the rst one and this independent of whether the transferee knows or not the person of the mortgagee. ) mortgage lien is inseperable form the property mortgaged. )ll subseuent purchasers must respect the mortgage whether the transfer to them be with or without the consent of the mortgagee. )nother reason why 2B3s contention is not correct is that because pledge or mortgage is indivisible.
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CHAPTER 10PROVISIONS COMMON TO PLEDGE AND
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CREDIT TRANSACTIONSCHAPTER 11
CONTRACT OF
PLEDGE
1. DEFINITION )n accessory, real and unilateral contract by virtue of which the debtor or a third person delivers to the creditor or to a third person movable property as security for the performance of the principal obligation, upon fulllment of which, the thing pledged, with all its accessories and accessions, shall be returned to the debtor or the third person. )n accessory contract by virtue of which personal property delivered to the creditor as security for a principal obligation with the agreement that the pledged property can be sold at a public auction in case of non-payment to answer for the unpaid obligation or the pledged property shall be returned by pledgeecreditor in case the principal obligation is fully paid. The creditor is given a right to retain his debtor3s movable property in his possession or in that of a third person to whom it has been delivered. The creditor does not become the owner of the thing pledged. &e is nothing more than a creditor with real right over the thing in his possession as a pledge, which he can dispose of through a notary at a public sale.
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CONTRACT OF PLEDGE Art!"# 2$?7. I+ 0t+ t t'# r#/t#/ r#/!r6# 64 Art!"# 2$%&9 t / +#!#//0r49 + r#r t !+/ttt# t'# !+tr0!t "#,#9 t'0t t'# t'+, "#,# 6# "0!# + t'# //#//+ t'# !r#tr9 r 0 t'r #r/+ 64 !33+ 0,r##3#+t. Art!"# 2$?;. A"" 3806"#/9 *'!' 0r# *t'+ !33#r!# 30+9 304 6# "#,#9 r8# t'#4 0r# //!#t6"# //#//+. Art!"# 2$?&. I+!rr#0" r,'t/9 #8#+!# 64 +#,t06"# +/tr3#+t/9 6""/ "0+,9 /'0r#/ /t!/9 6+/9 *0r#'/# r#!#t/ 0+ /3"0r !3#+t/ 304 0"/ 6# "#,#. T'# +/tr3#+t r8+, t'# r,'t t "#,# /'0"" 6# #"8#r# t t'# !r#tr9 0+ +#,t06"#9 3/t 6# +r/#.
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Article 20%5, 4he following reuisites are essential to the contracts of pledge and mortgage64hat they are constituted to secure the ful7llment of a principal obligation. 2. 4hat the pledger or mortgagor be the absolute owner of the thing pledged or mortgaged. '. 4hat the persons constituting the pledge or mortgage have the free disposal of their property and in their absence thereof, that they be legally authori8ed to the purpose. 4hird persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.
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2. REQUISITES (S-A-F-P-E) a. The pledge must be constituted to secure the fulllment of a principal obligation. b. The pledgor must be the absolute owner of the thing o Ay way of eception the real owner may be estopped even if the person who delivered the thing by way of pledge was not the real owner under the circumstance mentioned in )rticle !%=$.>
Article 1+'%. *ne who has allowed another to assume apparent ownership of personal property for the purpose of ma/ing any transfer of it, cannot if he received, the sum for which a pledge has been constituted, set up his own title to defeat the pledge of the property, made by the other to a pledge who received the same in good faith and for value.
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c. The pledgor must have free disposal of the property. d. The thing pledged should be placed in the possession of the creditor or of a third person, by common agreement e. To ta ke eecr against third persons, the description of the thing and the date of the pledge must appear in a public instrument. A. DELIVERY The contract of pledge is one of the % real contracts in the 6CC 'commodatum, mutuum, deposituum(. o 6o pledge is validly constituted if there is no delivery. o The delivery implied in )rticle #?@$ is a change in the actual possession of the property pledged and that a mere symbolic delivery is not su/icient o 5ntil there is delivery, the pledgee acuires no real right of property in the thing. 2ledge is merely a lien< and possession is indispensible in the right of a lien. o In $eita v -anzon, the animals in uestion were in the possession of a third person not specied in the contract before the alleged pledge was entered into. The thing pledged remained with them until eecution was levied. The "C ruled that there is no actual delivery of the alleged pledgee themselves. There is no reality no change in possession. &ence, the pledge was not e/ective. o In 'l $anco 'spanol v eterson the pledgee took possession of the goods pledged through a depository and a special agent appointed by it, each of whom had a duplicate key to the warehouse where the goods are stored, and that the pledgee took the proceeds of the goods sold. o
The Court ruled that the fact that the goods are continued to be in the warehouse the pledgor reviously rented does not a/ect the validity of the pledged. The pledgor could no longer dispose if the thing pledged and the pledgee is the only one authorized to do so through the depositary. The symbolical transfer of the keys to where the goods were stored were su/icient to show that the depositary appointed by the common consent of the parties were legally placed in the possession of the goods. This is a deposit to a third person as contemplated by )rticle #?@$. The pledgee assumed control over the goods because he already controlled the place where the goods were stored. $. CHARACTERISTICS (A-R-R-U-S) !. )ccessory Contract o Aeing an accessory contract of security, there is no transfer of ownership. In ntergrated /ealty #orporation and /aul o Santos v $, the "C ruled that a transfer of property by the debtor to a creditor, even if su/icient on its face to make an absolute conveyance, should be treated as pledge if the debt continues in eistence and is not discharged by the transfer and that accordingly, the use of the terms ordinarily importing conveyance, of absolute ownership will not be given that e/ect in such a transaction if they are also commonly used in pledges or mortgages and therefore do not unualiedly indicate a transfer of absolute ownership, in the absence of clear and
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unambiguous language or other circumstances ecluding an intent to pledge. #.. 0eal 0ight $. 0eal security contract %. 0eal Contract o 2erfected by mere delivery :. 5nilateral o 5pon the perfection of the contract with the delivery of the thing, it is only the creditor who has the obligation to return the thing. ;. "ubsidiary The thing pledged will answer for the principal o obligation only upon the default of the principal debtor.
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