RFBT - PLEDGE MORTGAGE AND ANTICHRESIS

Question 1

What are the common requisites of pledge and mortgage?

Answer 1

1. ) That they be constituted for the fulfillment of a principal obligation.
2. ) That the pledgor or mortgagor be the ABSOLUTE OWNER of the thing pledged or mortgaged.
3. ) That the persons constituting the pledge or mortgage have the free disposal of the property, and in the absence thereof, that they be legally authorized for the purpose.

Question 2

What is a conventional pledge?

Answer 2

Conventional pledge is that which is constituted by the mutual consent of the pledgor and the pledgee.

Question 3

What is Legal pledge?

Answer 3

Legal pledge is that which is created by operation of law. It refers to the right to retain a thing until he receives payment of his claim.

Question 4

What are the requisites of a conventional pledge?

Answer 4

1. That it be constituted to SECURE THE FULFILLMENT of a principal obligation.
2. That the PLEDGOR BE THE ABSOLUTE OWNER OF THE THING PLEDGED
3. That the persons constituting the pledge or mortgage have the FREE DISPOSAL OF THE PROPERTY PLEDGED, and in the absence thereof, that they be legally authorized for the purpose.
4. That the thing pledged be PLACED IN THE POSSESSION OF CREDITOR or of a 3rd person by common agreement.

Question 5

What kind of delivery is necessary in a pledge?

Answer 5

A pledge, being a real contract requires for its perfection the DELIVERY OF THE THING to the creditor or a third person if by common agreement. WITHOUT ACTUAL DELIVERY, A PLEDGE IS VOID.

Question 6

What could be the object of pledges?

Answer 6

1. ) All movables within the commerce of men which are susceptible of possession.
2. ) Incorporeal rights evidenced by instruments/documents.

Question 7

What should be the form of pledges?

Answer 7

1.) IF BETWEEN PARTIES
Any form as long as there is ACTUAL DELIVERY of the object.

2.) AS REGARDS 3RD PERSONS
The pledge must be in A PUBLIC INSTRUMENT showing a DESCRIPTION OF THE THING PLEDGED and DATE OF PLEDGE to take effect against 3rd persons.

Question 8

What is the extent of pledge?

Answer 8

1. ) The thing pledged
2. ) Fruits, income, dividends or interests earned by the thing pledged, UNLESS there is a stipulation excluding them. If there is an EXCESS, creditor may apply it to the principal.
3. ) The offspring, of the thing pledged is an animal, unless there is a stipulation excluding them. The offspring however shall PERTAIN TO THE PLEDGOR.

Question 9

What are the rights of the debtor/pledgor?

Answer 9

1. ) To alienate, WITH THE CONSENT OF THE PLEDGEE, the thing pledged. The ownership of the thing pledged is transmitted to the vendee or transferee as soon as the pledgee consents to the alienation, but the pledgee shall continue in possession.
2. ) To ask that the thing pledged be judicially or extra-judicially deposited if it is used without authority or for a purpose other than for its preservation.

3.) To continue to be the owner of the thing pledged unless it is expropriated.
Expropriation - the action by the state or an authority of taking property from its owner for public use or benefit.

4. ) To ask for the return of the thing pledged after he has paid the debt and its interests/expenses.
5. ) To require that the thing pledged be deposited with a third person if it is in danger of being lost or impaired through the negligence or acts of the pledgee.
6. ) To demand the return of the thing pledged, upon offering another thing in pledge provided the latter is of the same kind and quality, if there are reasonable grounds to fear the destruction or impairment of the thing pledged without the fault of the pledgee.

Question 10

What are the obligation of the debtor/pledgor?

Answer 10

1. To pay the debt and its interests with expenses.
2. To pay damages that the pledgee may suffer by reason of the flaws of the thing pledged, if he was aware of such flaws but did not advise the pledgee of the same.

Question 11

What are the rights of the creditor/pledgee?

Answer 11

1. ) To retain in his possession the thing pledged until the debt is paid.
2. ) To demand reimbursement of the expenses made for the preservation of the thing pledged.
3. ) To bring actions which pertain to the owner of the thing pledged in order to recover it from 3rd persons
4. ) To use the thing pledged if he is authorized to do so, or when its use is necessary for its preservation.
5. ) If he is deceived of the substance of the thing pledged, he may either:
   a. ) claim that another thing be given to him in place of the thing pledged.
   b. ) Demand immediate payment of the principal obligation,

6.) To cause the sale of the thing pledged at a public sale if there is a danger of destruction/impairment in value of the thing pledged without his fault. The proceeds of the auction shall be security for the principal obligation in the same manner as the thing originally pledged.

7.) To collect and receive the amount due if the thing pledged is a credit which becomes due before it is redeemed, and to apply the same to the payment of his claim, and deliver the surplus should there be any to the pledgor.
Example: D received a promissory note of 10,000 from M due on March 1. D pledged the note to secure a loan of 8,000 from C which is due on March 5. C can collect the 10,000 from M, apply the 8,000 to the debt, and return the 2,000 excess to D.

8.) To sell the thing pledged upon default of the debtor.

Question 12

What are the obligations of the creditor/pledgee?

Answer 12

1. ) To take care of the thing pledged with the diligence of a good father of a family.
2. ) To be liable for the loss or deterioration of the thing pledged unless it is due to fortuitous event.
3. ) Not to deposit the thing pledged with a 3rd person unless authorized( if so, it must be in a PUBLIC INSTRUMENT)
4. ) To be responsible for the acts of his agents or employees with respect to the thing pledged.
5. ) Not to use the thing pledged unless he is authorized by owner and the usage is necessary for its preservation.
6. ) To deliver to the debtor the surplus after paying his claim from what he has collected on a credit that was pledged and which has become due before it is redeemed.

Question 13

What are the rights of a third person who pledges his own movable property to secure the debt of another?

Answer 13

1. ) To be indemnified by the debtor if he pays the creditor, and the indemnification shall consist of:
   a. total amount of debt
   b. Legal interests
   c. expenses incurred by pledgor notifying debtor
   d. Damages if due

2.) To be subrogated to all the rights of the creditor if he pays the creditor.

3. ) To be released from liability in the following cases:
   a. ) If the creditor voluntarily accepts immovable or other property in payment of the debt even if the creditor thereafter loses the same by eviction.

D borrowed 50,000 from C secured by T’s ring. If C accepts a parcel of land from D in payment of debt,(dation in payment), T can demand to be released from pledge, even if C loses the property paid by D by eviction

b. ) If an extension of time is granted to the debtor by the creditor without the pledgor’s consent.
c. ) If through some act of the creditor the pledgor cannot be subrogated to the rights, mortgages and preferences of the creditor.

D owes C, and the debt is secured by T’s ring(pledge) and G as guarantor. If C cancels G’s guarantee, T is released from liability since he can no longer go after G if D defaults.

Question 14

How are pledges extinguished?

Answer 14

1.) Indirect Causes - When the debtor pays the creditor

2. ) Direct Causes
   a. ) Return by the pledgee of the thing pledged to pledgor/owner

b. ) Renunciation or abandonment IN WRITING by the pledgee. Acceptance by pledgor not necessary, and in the meantime the pledgee becomes a depositary upon the renunciation.
c. ) Sale of the thing pledged - sale must be by PUBLIC AUCTION, through a NOTARY PUBLIC, with NOTICE TO DEBTOR AND OWNER OF THING
d. ) Appropriation of the thing pledged, in case thing is not sold in 1st and 2nd auction. In this case, creditor must give an acquittance for his entire claim.

Question 15

Any stipulation that the pledge is not extinguished by the return of the thing pledged is:

Answer 15

VOID

Question 16

The pledgee shall be disqualified from bidding at the public auction of the thing if?

Answer 16

He is the only bidder.

Question 17

What are examples of Legal Pledge?

Answer 17

1. ) Possessory lien by a possessor in good faith. - retain the thing which he has incurred and necessary/useful expenses until he has been reimbursed. (B bought from S a bike. He spent 1000 on accessories and repair. Later it turns out that O was the real owner and was able to prove such. B is entitled to retain the thing until O has reimbursed him for the expenses he incurred.)
2. ) Possessory lien of worker - He who has executed work upon a movable has a right to retain it by way of pledge until he is paid. (Mechanic may retain the car he repaired until the car’s owner has paid him for his service.)
3. ) Depositary’s right of retention - depositary may retain the thing deposited until the full payment of what may have been due him by reason of the deposit. (Warehouse owner has the right to retain the goods stored until whoever stored them has fully paid the storage costs due him.)

Question 18

Differentiate conventional and legal pledge.

Answer 18

1.) If PROCEEDS OF SALE EXCEED AMOUNT OF DEBT
Conventional - Excess belongs to the creditor, unless there is a stipulation that it shall belong to debtor.
Legal - Excess belongs to debtor.

2.) If AMOUNT OF DEBT EXCEEDS PROCEEDS OF
SALE
Conventional - Creditor cannot recover deficiency
Legal - Creditor can recover deficiency.

Question 19

What is a real estate mortgage?

Answer 19

Real estate mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially subjecting to such security immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated.

Question 20

What are the requisites of a real mortgage?

Answer 20

1. ) That it be constituted to secure the fulfillment of a principal obligation.
2. ) That the mortgagor be the absolute owner of the thing mortgaged.
3. ) That the person constituting the mortgage must have the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose.
4. ) That the document in which the mortgage appears be recorded in the Registry of Property.

Question 21

What are the kinds of real mortgage?

Answer 21

1. ) Conventional - created by agreement of the parties
2. ) Legal - One executed pursuant to an express requirement of a provision of law.
3. ) Equitable - one which although lacking certain formality, shows the intention of the parties to charge a real property as a security for a debt and contains nothing contrary to law.

Question 22

What form is needed for a real mortgage?

Answer 22

AS TO PARTIES - The real mortgage may be in any form since it is a consensual contract. It is binding between the parties even if NOT REGISTERED W/ REGISTRY OF PROPERTY. However it must be in a public instrument for the CONVENIENCE OF THE PARTIES.

AS TO 3RD PERSONS - To be binding against 3rd persons, it must be recorded in the Registry of Property.

Question 23

May the owner of the property alienate/sell the property even if it is mortgaged?

Answer 23

Yes. Any stipulation prohibiting this is VOID.

Question 24

May the owner of the thing execute a second mortgage on it?

Answer 24

Yes, even without the consent of the 1st mortgagee, unless there is a stipulation that consent of the 1st mortgagee is required.

Question 25

What is foreclosure?

Answer 25

Foreclosure is the remedy available to mortgagee by which he subjects the property mortgaged to the satisfaction of the obligation secured when it is not paid when due or when there is any violation of any condition/stipulation/warranty by the mortgagor.

Question 26

What are the kinds of foreclosure? (Chattel and Real)

Answer 26

1. ) Judicial foreclosure - made through filing a petition in court if defendant fails to pay in time, the property shall be sold.
   a. ) Excess of proceeds over debt is returned to the mortgagor.
   b. ) Creditor can go after the debtor if proceeds are deficient.

2.) Extra-judicial foreclosure - Occurs when there is a stipulation may be foreclosed extra-judicially or when extra-judicial foreclosure sale is made under SPECIAL POWER OF ATTORNEY.

a. ) Excess of proceeds over debt is returned to the mortgagor.
b. ) Creditor can go after the debtor if proceeds are deficient.

Question 27

What is Redemption?

Answer 27

Redemption is a transaction through which mortgagor or one claiming in his right, by means of payment, or the performance of the condition, reacquires or buys back the value of the title which may have passed under the mortgage.

Question 28

What are the kinds of redemption?

Answer 28

1. ) Equity of redemption - Right of the mortgagor to redeem the mortgaged property after his default in the performance of his obligation but BEFORE the property is sold.
   a. JUDICIAL FORECLOSURE - Mortgagor is given NOT LESS THAN 90 DAYS to pay the mortgage debt before the property is sold

b. EXTRA-JUDICIAL FORECLOSURE - Mortgagor may avail himself of this right after default but before the sale of property

2. ) Right of redemption - refers to the right of the mortgagor to repurchase the property within a certain period AFTER it was sold for the payment of the mortgage debt.
   a. JUDICIAL FORECLOSURE - Mortgagor may redeem the property AFTER THE SALE but before confirmation of the court of the sale. After the sale is confirmed by the court, the right of redemption is no longer available, except those granted by banks under General Banking Act

b. EXTRA-JUDICIAL FORECLOSURE - Mortgagor has ONE YEAR FROM THE DATE OF REGISTRATION OF THE SALE TO REDEEM THE PROPERTY.

Question 29

What is Chattel Mortgage?

Answer 29

Chattel Mortgage refers to a contract by virtue, which involves recording the personal property in the Chattel Mortgage Register as security for the performance of an obligation.

Question 30

What are the requisites of a chattel mortgage?

Answer 30

1. ) That it be constituted to secure the fulfillment of a principal obligation.
2. ) That the mortgagor be the absolute owner of the thing mortgaged.
3. ) That the person constituting the mortgage must have the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose.
4. ) That the document in which the mortgage appears be recorded in the Chattel Mortgage Register.

Question 31

What can be the object of chattel mortgages?

Answer 31

Only personal property. such as:

1. ) Movables susceptible of appropriation.
2. ) Real property which by any provision of law is considered as personalty such as growing crops.
3. ) Forces of nature which are brought under control by science such as electricity/gas/light.
4. ) In general, all things which can be transported from one place to another without impairment.
5. ) Obligations/actions which have for their objects movables or demandable sums.
6. ) Shares of stock of agricultural/commercial and industrial entities.

Question 32

What is the form required for chattel mortgages?

Answer 32

1. ) Between parties - must recorded in the Chattel Mortgage Register of the province where the mortgagor resides and also of the province where the property is located if it is different from the residence of the mortgagor.
2. ) As to 3rd persons - An affidavit of good faith must be appended to the Deed of Chattel Mortgage and recorded therewith in the Chattel Mortgage Register.

Question 33

What is an affidavit of good faith?

Answer 33

A sworn statement attesting to the fact that the mortgage is made for the purpose of securing the obligation specified in the conditions thereof and for no other purpose.

Question 34

What are the grounds of foreclosure in chattel mortgages?

Answer 34

1. ) The principal obligation is not paid when due.

2. ) When there is any violation of any condition, stipulation or warranty by the mortgagor.

Question 35

What is Antichresis?

Answer 35

Antichresis is a contract whereby the creditor acquires the right to receive the fruits of an IMMOVABLE of his debtor, with the obligation to apply them to the payment of the interest, and thereafter to the principal of his credit. (Anti - against , chresis - use)

Question 36

What are the requisites of an antichresis?

Answer 36

1. ) That it be constituted to secure the fulfillment of a principal obligation.
2. ) That the debtor/3rd person be the absolute owner of the immovable property.
3. ) That the debtor must have the free disposal of such immovable property, and in the absence thereof. that he be duly authorized for the purpose.
4. ) That the AMOUNT OF THE INTEREST AND PRINCIPAL BE IN WRITING, otherwise the antichresis is VOID.

Question 37

What is the measure of application of fruits in an antichresis?

Answer 37

It is measured at actual market value of the fruits AT THE TIME OF APPLICATION thereof to the interest and principal.

Question 38

What does free disposal of a thing mean?

Answer 38

It means that the property being pledged or mortgaged is free from claims or encumbrances.

Question 39

When may a thing pledged or mortgaged be sold or alienated to pay debt?

Answer 39

GENERAL RULE: The thing pledged/mortgaged cannot be sold or alienated since payment of debt cannot yet be compelled.

EXCEPTION:
IF BEFORE MATURITY: If the pledgor/mortgagor fails to fulfill certain conditions, such violation would make the debt due and entitle the pledge or mortgagee to have the thing sold through formalities required by law, such as when:
a. Debtor has lost the right to make use of the period
b. There is an acceleration clause in an obligation payable in installments.

AFTER MATURITY:
Default of debtor to pay after maturity causes the think pledged or mortgaged to be sold or alienated to the creditor.

Question 40

T or F

Pactum commissorium is void for being contrary to public order.

Answer 40

False, morals, and public policy.

Question 41

What is pactum commissorium?

Answer 41

Stipulation in a pledge or mortgage which provides for automatic forfeiture of ownership of thing pledged/mortgaged in favor of the creditor by mere default of debtor.

Question 42

T or F

A pledgee/mortgagee may purchase the thing pledged if stipulated.

Answer 42

True.

Question 43

T or F

A pledgee/mortgagee may bid at the public auction of the thing pledged/mortgaged.

Answer 43

True.

Question 44

When is appropriation allowed in pledge and mortgage?

Answer 44

Pledge - the thing pledged may be appropriated ONLY IF THE THING PLEDGED IS NOT SOLD AT TWO PUBLIC AUCTIONS. The pledgee is required to give an acquittance for his entire claim, meaning he cannot recover the deficiency anymore.

Mortgage - mortgaged property ARE NEVER APPROPRIATED.

Question 45

T or F
Generally, a pledge or mortgage is indivisible, even though the debt may be divided among the successors in interest or when the debtors are jointly liable.

Answer 45

True.

Question 46

When is a pledge or mortgage divisible?

Answer 46

It is divisible only when several things are pledged and each one guarantees only a determinate portion of the credit.

Question 47

How shall a thing pledged be sold?

Answer 47

The sale must be:

a. by public auction
b. Through a notary public, and
c. With notice to the debtor and owner of the thing pledged, stating the amount for which the public sale is to be held.

Question 48

Who may bid at the public auction for the thing pledged?

Answer 48

a. Pledgor or owner
b. Pledgee (If only one bidder and it is the pledgee, his offer shall be void)
c. 3rd Persons

Question 49

What is the rule when 2 or more things are pledged and the debtor defaults?

Answer 49

The pledgee may choose which he will cause to be sold unless there is a contrary stipulation and he may demand the sale of only as many things as are necessary for the payment of debt.

Question 50

Explain the rules when a thing pledged is appropriated.

Answer 50

A thing pledged is only appropriated if IT IS NOT SOLD IN THE 1ST AND 2ND PUBLIC AUCTION. In this case, the creditor shall be obliged to give an acquaintance for his entire claim and extinguishment of the pledge and the principal obligation.

Question 51

What are the characteristics of a real mortgage?

Answer 51

1. Accessory contract
2. Indivisible
3. Inseparable
4. Real right
5. Real property

Question 52

How shall the proceeds of a foreclosure sale be distributed?

Answer 52

1. The cost of sale
2. Claim of person foreclosing the mortgage
3. Claims of junior encumbrances in the order of their priority
4. Balance after 1,2,3 returned to the mortgagor.

Question 53

What is upset/tipo price?

Answer 53

It is the price set by the parties as the amount at which the property will be sold at public auction, and such stipulation for such price IS VOID, because it contravenes the Rules of Court stating that property mortgaged must be sold to the highest bidder.

Question 54

What are the obligations of the creditor in an antichresis?

Answer 54

1. To pay the taxes and charges upon the immovable, unless there is a stipulation to the contrary
2. To bear the expenses necessary for its preservation and repair

Question 55

Explain how the fruits of an immovable are applied in an antichresis.

Answer 55

1. Taxes and charges upon immovable
2. Expenses for preservation and repair
3. Interest on the principal obligation
4. Principal obligation

Question 56

What is the effect of nonpayment of debt within the agreed-upon period in an antichresis? What are the creditor’s remedies?

Answer 56

1. Petition the court for payment of debt
2. To sell the immovable, and the rules on foreclosure of mortgage shall apply. In case of a deficiency in the foreclosure sale, the creditor can recover the deficiency.

Question 57

On March 1, 2015, D obtained a loan of 10,000 from C. To secure the debt which is payable on May 1, 2015, D pledged a promissory note amounting to 12,000 which was executed in D’s favor by M. The promissory note is due April 25, 2015 and properly endorsed by D to C.

a. On April 25, C can collect the note of 12,000 from M and the entire proceeds belongs to C.
b. On April 25, C can collect the note of 12,000 from M and must return the 2,000 excess to D.
c. C cannot collect from M.

Answer 57

b. On April 25, C can collect the note of 12,000 from M and must return the 2,000 excess to D.

Question 58

T or F
A contract of antichresis may secure all kinds of obligations, be they pure or subject to a resolutory or suspensive condition.

Answer 58

True.

Question 59

The measurement of the application of fruits to the interest and principal obligation in antichresis is the actual value of fruits at the time they are:

a. gathered
b. applied
c. gathered less reasonable depreciation if any
d. applied less reasonable depreciation if any.

Answer 59

b. applied.

Question 60

B bought a car from C for 360,000, with 30,000 as a downpayment and the balance in installments over 3 years, the car secured by a chattel mortgage. B was unable to pay the 4th and succeeding installments and as a result, C foreclosed the mortgage. The total payments made by B was only 100,000. May C recover the deficiency?

Answer 60

No, since this is covered by Recto Law, chattel mortgage on personal property acquired in INSTALLMENTS.

Question 61

B bought a car from C for 360,000, with 30,000 as a downpayment and the balance in installments over 3 years, the car secured by a chattel mortgage. B was unable to pay the 4th and succeeding installments and as a result, C foreclosed the mortgage. The total payments made by B was only 100,000. May C recover the deficiency?

Answer 61

No, since this is covered by Recto Law, chattel mortgage on personal property acquired in INSTALLMENTS.

Question 62

D obtained a loan of 5000 from C. The obligation is secured by a pledge of D’s ring which he delivered to C, with both the loan and pledge in a private instrument. While the loan was outstanding, D sold the ring to X in a public instrument, with X unaware of the pledge. Before X could obtain actual delivery of the ring, he learned that D pledged the ring to C and that C was selling the ring in a public sale because of D’s default.

a. X is bound by the pledge of D to C
b. X is not bound by the pledge of D to C
c. C can sell the ring to satisfy his claim
d. X did not acquire ownership of the ring from D

Answer 62

b. X is not bound by the pledge of D to C

Question 63

When the thing pledged is in danger of deterioration or impairment without the fault of the pledge, the pledgor has a right to demand the return the thing pledged by offering another thing of the same kind and quality. At the same time, the pledge has a right to cause the sale of the thing pledged. Who between the pledgor and pledged is given preferential right?

a. Pledgor
b. Pledgee
c. Either one whoever asserts first the right
d. Neither

Answer 63

b. Pledgee

Question 64

D borrowed 50,000 from C. The parties agreed in a private instrument that D’s goods which are deposited in the warehouse of W would secure the loan by way of pledge. C never took actual possession of the goods, nor did the parties agree that the goods would remain with W. Was a pledge constituted on the goods?

Answer 64

No, the goods must be delivered to C, or there must have been a common agreement that the goods would remain in W’s possession.