QUESTIONS:

1. What is a Contract of Pledge?

- It is a contract by virtue of which the debtor delivers to the creditor a movable property
susceptible of appropriation or a document evidencing incorporeal rights for the purpose of
securing the fulfillment of a principal obligation, with the understanding that when the
obligation is fulfilled, the thing delivered shall be returned (with all its fruits and accessions
in appropriate cases).
2. What is the subject matter of Pledge?
- All movables which are within commerce may be pledged, provided they are susceptible of
possession (Art. 2094).
3. What are the characteristics of a pledgor?
- The pledgor must be the ABSOLUTE OWNER of the thing pledged (Art. 2085[2]).
The pledgor must also have FREE DISPOSAL of their property and in the absence
thereof, the pledgor must be LEGALLY AUTHORIZED for the purpose (Art.
2085[3]).
4. Is delivery essential in a contract of pledge?
- Pledge is merely a lien, and possession is indispensable to the right of a lien.
Without delivery, therefore, there cannot be a pledge.
5. When is pledge binding against third persons?
- The contract of pledge is not effective against third persons unless, in addition to delivery
of the thing pledged, it is embodied in a PUBLIC INSTRUMENT which contains a
description of the thing and the date of the pledge.
6. What is the effect of alienation by the pledgor of thing pledged?
- As soon as the pledgee gives his consent, the ownership of the thing pledged is transferred
to the vendee subject to the rights of the pledgee, namely, that the thing sold may be
alienated to satisfy the obligation (Art. 2112) and that the pledgee must
continue on possession during the existence of the pledge (Arts. 2093, 2098).
7. What is the right of the pledgee with regards to the earnings of the pledged thing?
- The pledgee can apply the fruits, income, dividends, or interest earned or produced by the
thing pledged to the payment of interest, if owing, and thereafter to the principal of his
credit (Art. 2102).
8. When can the Pledgor as the thing pledged to be deposited?
- In the following cases, the owner may ask that the thing pledged be deposited JUDICIALLY
or EXTRAJUDICIALLY:
1. If the creditor uses the thing without authority (Art. 2104);
2. If he misuses the thing in any other way (Art. 2104); or
3. If the thing is in danger of being lost or impaired because of the negligence or willful act of
the pledgee (Art. 2106).
9. What are ways of Extinguishing Pledge?
- The following are ways of extinguishing pledge:
1. By return of the thing pledged
2. By renunciation
10. What are the consequences when the thing pledged is in danger of destruction?
1. If through the negligence or willful act of the pledgee, the thing pledged is in danger of
being lost or impaired, the pledgor may require that it be deposited with a third
person (Art. 2106);
2. If there are reasonable grounds to fear the destruction or impairment of the thing
pledged, without the fault of the pledgee, the pledgor may demand the return of
the thing, upon offering another thing in pledge (Art. 2107); and
3. If, without the fault of the pledgee, there is danger of destruction, impairment, or
diminution in value of the thing pledged, he may cause the same to be sold at
public sale (Art. 2108).
11. Who are the parties to the contract of Pledge?
1. Pledgor
2. Pledgee
12. Can an incorporeal right be a subject of a contract of pledge?
- Incorporeal rights, evidenced by negotiable instruments, bills of lading, shares of stock,
bonds, warehouse receipts and similar documents may also be pledged.
13. How are incorporeal rights pledged?
- The instrument proving the right pledged shall be delivered to the creditor, and if
negotiable, must be indorsed (Art. 2095).