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Art. 2071
Protective remedy
before payment.
Preliminary remedy
and
Consequences of indivisibility:
1. Single thing Every portion of the property pledged
or mortgaged is answerable for the whole obligation
2. Several things All of the several things pledged or
mortgaged are liable for the totality of the debt
3. Debtors heir/creditors heir - Neither the debtors
heir who has paid part of the debt cannot ask for
proportionate extinguishment, nor creditors heir
who received his share of the debt return the pledge
or cancel the mortgage as long as the debt is not
completely satisfied.
EXCEPTIONS:
1. Where each one of several things guarantees a
determinate portion of the credit
2. Where only a portion of the loan was released
3. Where there was failure of consideration.
4. Where there is no debtor-creditor
relationship
NOTES:
The mere embodiment of a real estate mortgage and
a chattel mortgage in one document does not have
the effect of fusing both securities into an indivisible
whole.
The mortgagee, therefore, may legally foreclose the
real estate mortgage extrajudicially and waive the
chattel mortgage foreclosure, and maintain instead a
personal action for the recovery of the unpaid
balance of the credit (Phil. Bank of Commerce vs.
Macadaeg, 109 Phil 981)
E. When the principal obligation becomes due, the
things in which the pledge, mortgage, or
antichresis consists may be alienated for the
payment to the creditor. (Art. 2087)
NOTES:
If the debtor fails to comply with the obligation at
the time it falls due, the creditor is merely entitled
to move for the sale of the thing pledged or
mortgaged in order to collect the amount of his claim
from the proceeds.
If he wishes to secure a title to the mortgaged
property, he can buy it in the foreclosure sale
(Montevirgin vs. CA, 112 SCRA 641)
F. Pledgor, mortgagor, antichretic debtor retains
ownership of the thing given as a security
PLEDGE (Arts 2093 2123)
Kinds:
1. Conventional /Voluntary created by contract
2. Legal created by operation of law (examples:
Art. 546, 1731 and 1914 NCC)
NOTES:
The provisions of possession, care and sale of the
thing as well as on the termination of the pledge
governing conventional pledges are applicable to
pledges created by operation of law (Art 2121)
Unlike, however, in conventional pledge where
the debtor is not entitled to the excess unless it
is otherwise agreed, in legal pledge, the
remainder of the price of the sale after payment
of the debt and expenses, shall be delivered to
the debtor.
In legal pledge, there is no definite period for the
payment of the principal obligation. The pledgee
must make a demand for the payment of the
amount due him; otherwise he cannot exercise
the right of sale at public auction (Art 2122)
Characteristics:
1.
Real contract it is
perfected by the delivery of the thing pledged
by the debtor who is called the pledgor to the
creditor who is called the pledgee, or to a third
person by common agreement;
2.
Accessory contract
it has no independent existence of its own;
3.
Unilateral contract
it creates an obligation solely on the part of the
4.
Consideration in pledge:
Insofar as the pledgor is concerned, the cause is the
principal obligation.
If the pledgor is not the debtor, the cause is the
compensation stipulated for the pledge or the mere
liberality of the pledgor.
Extent of pledge: Unless stipulated otherwise, pledge
extends to the fruits, interests or earnings of the thing.
Rights and Obligations of a Pledgor
Rights
Obligations
1. To demand return in
case of reasonable
grounds to fear
destruction or
impairment of the thing
without the pledgees
fault, subject to the
duty of replacement
(Art 2107)
2. To bid and be
preferred at the public
auction (Art 2113)
3. To alienate the thing
pledged provided the
pledgee consents to the
sale (Art 2097)
4. To ask that the thing
pledged be deposited
(Arts 2104 & 2106)
1. To advise the
pledgee of the
flaws of the thing
(Art 2101)
2. Not to demand
the return of the
thing until after
full payment of
the debt,
including interest
due thereon and
expenses incurred
for its
preservation (Art
2105)
NOTES:
As an accessory contract, its consideration is that
of the principal contract from which it receives
life.
A mortgage does not involve a transfer, cession or
conveyance of property but only constitutes a
lien thereon. Until discharged, it follows the
property wherever it goes and subsists
notwithstanding changes of ownership.
A mortgage gives the mortgagee no right or claim
to the possession of the property, and therefore,
a mere mortgagee has no right to eject an
occupant of the property mortgaged unless the
mortgage should contain some provision to that
effect. The only right of a mortgagee in case of
non-payment of a debt secured by mortgage
would be to foreclose the mortgage and have the
encumbered property sold to satisfy the
outstanding indebtedness. If the possession is
transferred to the mortgagee, it must not
expressly be for purpose of applying the fruits to
the interest then to the principal of the credit,
for then it would be an antichresis.
It is not an essential requisite that the principal
of the mortgage credit bears interest, or that the
interest as compensation for the use of the
principal and enjoyment of its fruits be in the
form of a certain percent thereof.
REAL MORTGAGE
1. Constituted on
immovables
2. Delivery is not
necessary
Extent of Mortgage:
Absent express stipulation to the contrary, the
mortgage includes the accessions, improvements,
growing fruits and income of the property not yet
received when the obligation becomes due and to the
amount of the indemnity granted or owing to the
proprietor from the insurers of the property
Judicial
foreclosure
1. There is court
intervention
2. Decisions are
appealable
3. Order of court
cuts off all rights of
the parties
impleaded
4. There is equity
of redemption
except on banks
which provides for
a right of
redemption
5. Period of
redemption starts
from the finality of
the judgment until
order of
confirmation
6. No need for a
special power of
attorney in the
contract of
mortgage
Extrajudicial
foreclosure
1. No court
intervention
2. Not appealable
because it is
immediately
executory
3. Foreclosure does
not cut off right of
all parties involved
4. There is right of
redemption
5. Period to redeem
start from date of
registration of
certificate of sale
6. Special power of
attorney in favor of
mortgagee is
needed in the
contract
NOTES:
A foreclosure sale retroacts to the date of
registration of the mortgage and that a person who
takes a mortgage in good faith and for valuable
consideration, the record showing clear title to the
mortgagor, will be protected against equitable claims
on the title in favor of third persons, of which he had
no actual or constructive notice (St. Dominic
Corporation vs. IAC 151 SCRA 577).
Where there is a right to redeem, inadequacy of
price is not material because the judgment debtor
may reacquire the property or else sell his right to
redeem and thus recover any loss he claims to have
suffered by reason of the price obtained at the
auction sale and consequently not sufficient to set
aside the sale.
Mere inadequacy of the price
obtained at the sheriffs sale will not be sufficient to
set aside the sale unless the price is so inadequate
as to shock the conscience of the court taking into
consideration the peculiar circumstances attendant
thereto. (Sulit vs. CA, 268 SCRA 441)
Should there remain a balance due to the mortgagee
after applying the proceeds of the sale, the
mortgagee is entitled to recover the deficiency. This
rule applies both to judicial and extra-judicial
foreclosure real mortgage.
5.
6.
7.
8.
9.
NOTES:
The Mortgagor and Mortgagee have no right to waive
the posting and publication requirements under Act.
No. 3135. Notices are given to secure bidders and
prevent a sacrifice of the property. Clearly, the
statutory requirements of posting and publication are
mandated, not for the mortgagors benefit, but for
the public or third persons. Failure to comply with
the statutory requirements as to publication of notice
of auction sale constitutes a jurisdictional defect
which invalidates the sale.Lack of republication of
notice of foreclosure sale made subsequently after
the original date renders such sale void (PNB vs.
Nepomuceno Productions Inc., G.R. No. 139479.
December 27, 2002).
Sec 3 of Act 3135 does not require personal or any
particular notice on the mortgagor much less on his
successors-in-interest where there is no contractual
stipulation therefor. Hence, unless required in the
mortgage contract, the lack of such notice is not a
ground to set aside a foreclosure sale.
Neither does Sec 3 require posting of notice of sale
on the mortgage property and the certificate of
posting is not required, much less considered
indispensable, for the validity of a foreclosure sale.
Redemption
It is the transaction by which the mortgagor
reacquires or buys back the property which may have
passed under the mortgage, or divests the property
of the lien which the mortgage may have created.
NOTES:
A sale by the mortgagor to a third party of the
mortgaged property during the period for
redemption transfers only the right to redeem
the property and the right to possess, use and
enjoy the same during said period.
Where sale with assumption of mortgage not
registered and made without the consent of the
mortgagee, the buyer, thereof, was not validly
substituted as debtor and, hence, had no right to
redeem (Bonnevie vs. CA, 125 SCRA 122).
Kinds:
1. Equity of Redemption right of mortgagor to
redeem the mortgaged property after his default
in the performance of the conditions of the
mortgage within the 90-day period from the date
of the service of the order of foreclosure or even
thereafter but before the confirmation of the
sale. Applies to judicial foreclosure of real
mortgage and chattel mortgage foreclosure.
Characteristics
1. Accessory contract it secures the performance of a
principal obligation
2. Formal contract it must be in a specified form to be
valid, i.e., in writing. (Art 2134)
1.
2.
3.
4.
Pledge
1. Refers to real
property
2. Perfected by mere
consent
1. Refers to personal
property
2.
Perfected
by
delivery of the thing
pledged
3. Consensual contract 3. Real Contract
Antichresis
Real Mortgage
1. Property is
delivered to creditor
1. Debtor usually
retains possession of
the property
2. Creditor does not
have any right to
receive the fruits;
but the mortgage
creates a real right
over the property
3. The creditor has no
such obligation
2. Creditor acquires
only the right to
receive the fruits of
the property, hence,
it does not produce a
real right
3. The creditor,
unless there is
stipulation to the
contrary, is obliged to
pay the taxes and
charges upon the
estate
4. It is expressly
4. There is no such
stipulated that the
obligation on part of
creditor given
mortgagee
possession of the
property shall apply
all the fruits thereof
to the payment of
interest, if owing,
and thereafter to the
principal
Subject matter of both is real property
Characteristics
1. Accessory contract it is for the purpose of securing
the performance of a principal obligation
2. Formal contract registration in the Chattel
Mortgage Register is indispensable for its validity
3. Unilateral contract it produces only obligations on
the part of the creditor to free the thing from the
encumbrance on fulfilment of the obligation.
1.
2.
3.
4.
5.
Pledge
1. Delivery of the
thing pledged is
necessary
2. registration not
necessary to be
valid
3. Debtor is not
entitled to excess
unless otherwise
agreed or except in
case of legal
pledge
4. If there is
deficiency, creditor
is not entitled to
recover
notwithstanding
any stipulation to
the contrary
4. If there is
deficiency after
foreclosure,
creditor is entitled
to recover the
deficiency from the
debtor, except
under Art. 1484
Subject matter of both is movable
property
OF
CREDITS
Concurrence of Credits
Possession by two or more creditors of equal
rights or privileges over the same property or all
of the property of the debtor
Preference of Credits
Right held by a creditor to be preferred in the
payment of his claim above others out of the
debtors assets.
NOTES:
The rules on preference of credits apply only
when two or more creditors have separate and
Lien
Applies only to
claims which do
not attach to
specific
properties
Creates a charge
on a particular
property
EXEMPT PROPERTY:
1. Present property those provided under Arts. 155
and 205 of the Family Code, Sec. 13, Rule 39 of
the Rules of Court, and Sec. 118 of the Public
Land Act
2. Future property a debtor who obtains a
discharge from his debts on account of his
insolvency, is not liable for the unsatisfied claims
of his creditors with said property subject to
certain exceptions expressly provided by law.
(Secs. 68, 69, The Insolvency Law [Act No. 1956])
3. Property under legal custody and those owned by
municipal
corporations
necessary
for
governmental purposes
General Categories of Credit:
1. Special Preferred Credits - those listed in Arts.
2241 and 2242 shall be considered as mortgages and
pledges of real or personal property or liens (Art. 2243).
Hence, they are not included in the insolvent debtor's
assets.
NOTES:
Arts. 2241 and 2242 do not give the order of
preference or priority of payment. They merely
enumerate the credits which enjoy preference with
respect to specific movables or immovables. With
respect to the same specific movables or
2.
NOTES:
In case of bankruptcy or liquidation of the employers
business, the unpaid wages and other monetary
claims of the employees shall be given first
preference and shall be paid in full before the claims
of the government and other creditors may be paid.
The terms, declaration of bankruptcy, or judicial
liquidation have been eliminated, nevertheless,
according to the SC, bankruptcy or liquidation
proceedings are still necessary for the operation of
the preference accorded to workers under Art. 110 of
the Labor Code. (DBP vs. NLRC 183 SCRA 328; RA No.
6715 Sec 10)
In case of rehabilitation, the preference of credit
granted to employees under Art 110 of the Labor
Code is not applicable (Rubberworld [Phils.] vs CA,
305 SCRA 722).
Refectionary Credit
Indebtedness incurred in the repair or reconstruction
of something previously made, such repair or
reconstruction being made necessary by the
deterioration or destruction of the thing as it
formerly existed.
ORDER OF PREFERENCE OF CREDITS
Arts. 2241 and 2242, jointly with Arts. 2246 to 2249
establish a two-tier order of preference:
1. First tier includes taxes, duties and fees due on
specific movable or immovable property;
2. Second tier all other special preferred (nontax) credits shall be satisfied pro-rata, out of any
residual value of the specific property to which
such credits relate.
NOTES:
The pro-rata rule does not apply to credits
annotated in the Registry of Property by virtue of
a judicial