pledge-mortgage-antichresis notes in business Law PDF

Preview

Summary

PLEDGE, MORTGAGE AND ANTICHRESISProvisions Common to Pledge and MortgageCommon requisites of pledge and mortgage That they be constituted to secure the fulfillment of a principal obligation. The principal obligation must be a valid obligation, as a rule, because being accessory contracts, pledge and...

Description

violation would make the debt due and entitle the pledgee or mortgagee to have the thing sold through the formalities required by law. (PNB vs. Lopez-Vito, 52 Phil 41) Thus, if the debtor has lost the right to make use of the period, or when there is an acceleration clause in an obligation payable in installments and the debtor has defaulted in the payment of an installment, the thing pledged or mortgaged may be alienated because such violations would make the balance of the debt become due and demandable.

PLEDGE, MORTGAGE AND ANTICHRESIS Provisions Common to Pledge and Mortgage Common requisites of pledge and mortgage 1. That they be constituted to secure the fulfillment of a principal obligation. The principal obligation must be a valid obligation, as a rule, because being accessory contracts, pledge and mortgage owe their existence upon the principal obligation. However, a pledge or mortgage may secure: a. All kinds of obligations, whether pure or subject to a suspensive or resolutory condition (Art. 2091) or even b. Voidable, unenforceable, or natural obligations. (Arts. 2052, 2086) 2.

That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged. a. Ownership at the time pledge or mortgage is constituted The pledgor or mortgagor must be the absolute owner of the thing pledged or mortgaged at the time it is constituted. Therefore, a pledge or mortgage constituted on future property is void. (Arenas vs. Raymundo, 19 Phil 46) b. Third persons may pledge or mortgage their property It is not required for the validity of a pledge or mortgage that the debtor be the owner of the thing pledged or mortgaged. Third persons may pledge or mortgage their property to secure another person's debt. (Art. 2085) However, they can be held liable only to the extent of the value of their property. With respect to mortgage, they may be held liable for any deficiency in case of foreclosure if they expressly agreed to assume the principal obligation. (Philtrust vs. Echaus, 52 Phil 852)

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. (Art. 2085) Free disposal means the property being given in pledge or mortgage is free from claims or encumbrances. Thus, if the pledge or mortgage was constituted on the property of a corporation under receivership, the pledge or mortgage is not valid, because the corporation does not have the free disposal of the thing. (Compana General de Tabacos vs. Gauzon, 20 Phil 261)

When thing pledged or mortgaged may be sold or alienated to pay debt 1. Before maturity General rule: The thing pledged or mortgaged cannot be sold or alienated since payment of the debt cannot yet be compelled. Exception: If the pledgor or mortgagor fails to fulfill certain conditions, such a

2.

At maturity Upon default of the debtor to pay the obligation at maturity, the thing pledged or mortgaged may be sold or otherwise alienated to pay the creditor. (Art. 2087)

Appropriation of the thing pledged or mortgaged 1. Pactum commissorium, concept This is a stipulation in a pledge or mortgage which provides for automatic forfeiture, i.e., that ownership of the thing pledged or mortgaged shall pass to the creditor by the mere default of the debtor. (Declaro vs. Alpha Insurance, 58564-R, June 16, 1978) The elements of pactum commissorium, which enables the mortgagee (or pledgee) to acquire ownership of the mortgaged (pledged) property without the need of foreclosure proceedings, are (a) there should be a property mortgaged (or pledged) by way of security for the payment of the principal obligation, and (b) and there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged (or pledged) in case of nonpayment of the principal obligation within the stipulated period. (Sps. Ong vs. Roban Lending Corporation, G. R. No. 172592, July 9, 2008; Garcia vs. Villar, G.R. No. 158891, June 27, 2012) This stipulation is void for being contrary to morals and public policy. (Perez vs. Cortez, 35 Phil 211) The creditor is allowed only to move for the sale of the thing pledged or mortgaged after the principal obligation becomes due, in order to collect the amount of his claims from the proceeds. (Ranjo vs. Salmon, 15 Phil 436) The stipulation, however, that the pledgee or mortgagee may purchase the thing pledged or mortgaged at its current price if the debt is not paid on time is valid. (See Warner-Barns vs. Buenaflor and Macoy, C.A. 36 OG 3290.) The pledgee or mortgagee may also bid at the public auction of the things pledged or mortgaged. 2.

Appropriation of property pledged or mortgaged a. Pledge Appropriation in pledge is allowed only if the thing pledged is not sold at two public auctions. The pledgee is required in this case to give an acquittance for his entire claim. (Art. 2112) b. Mortgage

In no case is appropriation of the property mortgaged allowed. Indivisibility of pledge and mortgage General rule: A pledge or mortgage is indivisible, even though the debt may be divided among the successors in interest of the debtor or of the creditor. (Art. 2089) This rule applies even if the debtors are jointly liable. (Art. 2090) 1.

Indivisibility among heirs of debtor The debtor's heir who has paid a part of the debt cannot ask for the proportionate extinguishment of the pledge or mortgage as long as the debt is not completely satisfied. (Art. 2089)

2.

Indivisibility among .heirs of creditor The creditor's heir who received his share of the debt cannot return the pledge or cancel the mortgage, to the prejudice of the other heirs who have not been paid. (Art. 2089)

Exception: The pledge or mortgage is divisible if several things are given in pledge or mortgage and each one of them guarantees only a determinate portion of the credit. The debtor in this case, shall have a right to the extinguishment of the pledge or mortgage as the portion of the debt for which each thing is answerable is satisfied. (Art. 2089) Examples: 1. D borrowed P10,000.00 from C. The debt is secured- by a pledge of D's ring and bracelet. Even if D pays C P6,000.00, he cannot ask for the return of the ring or the bracelet so as to extinguish partially the pledge. He can ask for the extinguishment of the pledge only after he has paid the obligation in full. However, if D and C agreed that the ring would secure the amount of P6,000.00, and the bracelet P4,000.00, then D can ask for the extinguishment of the pledge constituted on the ring upon his payment of P6,000.00. 2.

D borrowed from C P100,000.00 secured by a mortgage on D's two adjoining lots (Lot 1 and Lot 2). D dies leaving E and F as heirs with E inheriting Lot 1 and F Lot.2. Even if E pays C P50,000.00, he cannot ask for the extinguishment of the mortgage on Lot 1.

3.

Suppose it is C who dies leaving X and Y as heirs of the credit right. If D pays X P50,000.00, X cannot cancel the mortgage on Lot 1 to the prejudice of Y.

4.

A and B jointly borrowed P20,000.00 from C. To secure the debt, A pledged his necklace and B his ring. If A pays C P10,000.00, he cannot ask for the extinguishment of the pledge on his necklace. Although the debtors are jointly liable, the pledge constituted on the necklace and

the ring is indivisible. Promise to constitute pledge or mortgage A promise to constitute a pledge or mortgage gives rise only to a personal action between the contracting parties. (Art. 2092) The debtor can be compelled by the creditor to fulfill his promise by executing the pledge or mortgage. Until the mortgage has been executed, no real right on the property is created. In the case of pledge, the same shall not be perfected until the delivery of the object of the pledge. Should the debtor fail to comply with his promise to constitute the pledge or mortgage, he loses the benefit of the period. Accordingly, the creditor may demand immediate payment. (See Art. 1198.) Example: D borrowed P20,000.00 from C. The loan is payable in 12 months. D promised to execute a mortgage on his land within one month to secure the debt. C accepted the promise. In this case, no mortgage has been constituted yet. However, C has a personal right to demand the constitution of the mortgage. Once the mortgage has been constituted, it creates a real right in favor of C. If D does not constitute the mortgage within the one-month period, C may demand immediate payment of the debt. PLEDGE Kinds of pledge 1. Conventional or voluntary - That which is constituted by the mutual consent of the pledgor and the pledgee. 2. Legal - That which is created by operation of law. (Arts. 546, 1731 and 1994) Conventional Pledge Requisites 1. That it be constituted to secure the fulfillment of a principal obligation. (Art. 2085) 2. That the pledgor be the absolute owner of the thing pledged. (Art. 2085) 3. That the person constituting the pledge has the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. (Art. 2085) 4. That the thing pledged be placed in the possession of the creditor, or of a third person by common agreement. (Art. 2093) Necessity of actual or physical delivery A pledge, being a real contract, requires for its perfection the delivery of the thing to the creditor or to a third person by common agreement. Thus, without delivery, the pledge is void. (El Banco Espanol-Filipino vs. Peterson, 7 Phil 409) The delivery required here is actual

delivery. (Betita vs. Ganzon, 49 Phil 97; Pacific Commercial vs. PNB, 49 Phil 936) Thus, no pledge is constituted if the delivery is merely symbolic. 2. Object of the pledge 1. All movables within the commerce of men which are susceptible of possession. (Art. 2094) 2. Incorporeal rights evidenced by negotiable instruments, bills of lading, shares of stocks, bonds, warehouse receipts and similar documents. The instrument proving the right pledged shall be delivered to the creditor, and if negotiable must be endorsed. (Art. 2095)

3. 4. 5. 6.

Form of pledge 1. Between the parties The pledge may be in any form as in fact the mere delivery of the object is sufficient to bind the parties. 2. As regards third persons To take effect against third persons, the pledge must be in a public instrument showing a description of the thing pledged and the date of the pledge. (Art. 2096) Extent of pledge The pledge shall cover the following: 1. The thing pledged. 2. The fruits, income, dividends or interests earned or produced by the thing pledged, unless there is a stipulation excluding them. The creditor shall compensate what he receives as fruits, income, dividends or interests with those which are owing him. If none are owing him, or insofar as the amount may exceed that which is due, he shall apply it to the principal. (Art. 2102) Example: D borrowed from C P10,000.00 which bears interest at 1% a month. The obligation is secured by a pledge of certain shares of stock owned by D. In addition to delivering to C the stock certificate covering the shares, D also gave C the authority to collect the dividends on the stock. If in a certain month, C collects a dividend of P250.00, he shall apply P100.00 to the interest due, and the balance of P150.00 to the principal. If no interest is due to him, he shall apply the total amount of P250.00 to the principal. 3. The offspring, when the thing pledged is an animal, unless there is a stipulation excluding them. (Art. 2102) The offspring, however, shall pertain to the pledgor. (Art. 2102) Rights of the debtor/pledgor 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. (Art. 2097) 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. (Art. 2104) To continue to be the owner of the thing pledged unless it is expropriated. (Art. 2103) To ask for the return of the thing pledged after he has paid the debt and its interests, with expenses in a proper case. (Art. 2105) 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 willful act of the pledgee. (Art. 2106) 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. (Art. 2107) This right, however, is without prejudice to the right of the pledgee to have the thing sold at a public sale. The proceeds of the auction shall be security for the principal obligation in the same manner as the thing originally pledged. (Arts. 2107, 2108)

Obligations of the debtor/pledgor 1. To pay the debt and its interest, with expenses in a proper case, when they are due. (Art. 2105) 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. (Arts. 1951, 1201) Rights of the creditor/pledgee 1. To retain in his possession the thing pledged until the debt is paid. (Art. 2098) 2. To demand reimbursement of the expenses made for the preservation of the thing pledged. (Art. 2099) 3. To bring actions which pertain to the owner of the thing pledged in order to recover it from, or defend it against, third persons. (Art. 2103) 4. To use the thing pledged if he is authorized to do so, or when its use is necessary for the preservation of the thing. (Art. 2104) 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, or b. Demand immediate payment of the principal obligation. (Art. 2109) 6. To cause the sale of the thing pledged at a public sale, if there is a danger of destruction, impairment or diminution 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. (Art. 2108) 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. He shall apply what

8.

he has collected to the payment of his claim, and deliver the surplus, should there be any, to the pledgor. (Art. 2118) Example: D received a promissory note of P10,000.00 from M the same being due on March 1. Thereafter, D pledged the promissory note to secure a loan of P8,000.00 which he obtained from C. The loan is due on March 5. On March 1, C can collect the note of P10,000.00 from M. He shall apply P8,000.00 for the payment of his claim and deliver the surplus of P2,000.00 to D. To sell the thing pledged upon default of the debtor. (Arts. 2087, 2112)

If T pays C, T steps into the place of C. Thus, T can demand the indemnification mentioned in No. 1 above from D. If D cannot pay, T can go after G. 3.

Obligations of the creditor/pledgee 1. To take care of the thing pledged with the diligence of a good father of a family. (Art. 2099) 2. To be liable for the loss or deterioration of the thing pledged unless it is due to fortuitous event. (Art. 2099) 3. Not to deposit the thing pledged with a third person, unless authorized. (Art. 2100) 4. To be responsible for the acts of his agents or employees with respect to the thing pledged. (Art. 2100) 5. Not to use the thing pledged, except when: a. He is authorized by the owner, or. b. The use of the thing 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. (Art. 2108) Rights of a third person who pledges his own movable property to secure the debt of another 1. To be indemnified by the debtor if he pays the creditor. The indemnity consists of the following: a. The total amount of the debt. b. The legal interests thereon from the time the payment was made known to the debtor, even though it did not earn interest for the creditor. c. The expenses incurred by the pledgor after having notified the debtor that payment had been demanded of him. d. Damages, if they are due. (Arts. 2066, 2120))

Note: The acceptance by the creditor of a property in payment of the debt is in the nature of dacion en pager. b. If an extension of time is granted to the debtor by the creditor without his (pledgor's) consent. (Arts. 2079, 2080) c. If through some act of the creditor, the pledgor cannot be subrogated to the rights, mortgages and preferences of the creditor. (Arts. 2080, 2120) Thus, if, in the example in No. 2, C cancels G's guarantee, T is released from liability because if T pays C, T can no longer go after G if D cannot pay the indemnification due him (T). Extinguishment of pledge Pledge may be extinguished directly or indirectly. 1. Indirect cause - When the principal obligation secured by the pledge is extinguished, the pledge, being merely an accessory contract, is likewise extinguished. Any third person who has any right in or to the thing pledged may satisfy the principal obligation as soon as the latter becomes due and demandable. (Art. 2117) Example: D owes C P5,000.00. The debt is secured by a pledge of D's wristwatch. If D pays C P5,000.00, the debt is extinguished together with the pledge. 2.

2.

To be subrogated to all the rights of the creditor against the debtor if he pays the creditor. (Arts. 2067, 2120) The pledgor is considered a third person interested in the fulfillment of the obligation; hence, he is entitled to be subrogated to the creditor's rights upon payment. (See Arts. 1236 and 1302.) Example: D obtained a loan of P10,000.00 from C. The debt is secured by the guarantee of G and the pledge by T of his ring.

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. (Arts. 2077, 2120) Example: D borrowed P50,000.00 from C. The debt is secured by a pledge of T's ring. On due date, C accepted a parcel of land from D in payment of the debt. T can demand that he be released from the pledge. T shall be released even if later, C should lose the lot by eviction in case there is a rightful owner.

Direct causes - Pledge may be extinguished directly as follows: a. Return by the pledgee of the thing pledged to the pledgor or owner 1) Any stipulation that the pledge is not extinguished by the return of the thing is void. 2) Prima facie presumption that pledgee returned the thing pledged a) If the thing pledged is found in the possession of the pledgor or owner. b) If the thing pledged is in the possession of a third person who has received it from the pledgor or owner. (Art. 2110) b. Renunciation or abandonment in writing by the pledgee of the pledge.

1) The acceptance by the pledgor or owner of the renunciation, or the return of the thing pledged, is not necessary for such mode of extinguishing pledge. 2) The pledgee becomes a depositary upon renunciation (Art. 2111) if in the meantime, the thing pledged is not yet returned to the owner.

belongs to C unless the parties had an agreement that any excess shall be turned over to D. 5) Rule when two or more things are pledged The pledgee may choose which he will cause to be sold, unless there is a contrary stipulation. He may demand the sale of only as many of the things as are necessary for the payment of the debt. (Art. 2119) d. Appropriation of the thing pledged If the thing pledged is not sold in the first and second public auctions, the creditor may appropriate the thing pledged. In this case, he shall be obliged to give an acquittance for his entire claim. (Ar...