ASSIGNMENT

1. What is the Contract of Pledge? What are the requisites of a Contract of Pledge?

Contract of Pledge is wherein the debtor delivers to the creditor or a third person a movable
ot a document evidencing incoporeal rights for the for the prupose of securing fulfilment of
principal obligation with that when the obligation is fulfils. The thing shall be returned with all
its fruits and accessions.

Furthermore in order to constitute a contract of pledge, that the thing pledged be placed in the
possession of the creditor o of third person by common agreement provide a certain requirements
as provided in article 2085 of the New Civil Code of the Philippines the following provided. (1)
That they be constituted to secure the fulfilment of a principal ; (2) That the pledge or the
mortgagor be the absolute owner of the thing pledge; (3) That the persons constituting the pledge
or mortgage have free disposal of their property, and in the absence thereof, that they be legally
authorized for the purpose.

2. What is EQUITY OF REDEMPTION? Discuss and enunciate the doctrine in the

case of HUERTA ALBA RESORT, INC. VS. CA, 339 SCRA 534

Equity of redemption is simply the right of the defendant mortgagor to extinguish the
mortgage and retain ownership of the property by paying the secured debt within the 90-day
period after the judgment becomes final, in accordance with Rule 68, or even after the
foreclosure sale but prior to its confirmation.

Doctrine : Distinction between the equity of redemption and right of redemption that equity
of redemption is, to be sure, different from and should not be confused with the right of
redemption.

The right of redemption in relation to a mortgage - understood in the sense of a prerogative

to re-acquire mortgaged property after registration of the foreclosure sale - exists only in the case
of the extrajudicial foreclosure of the mortgage. No such right is recognized in
a judicial foreclosure except only where the mortgagee is the Philippine National Bank or a bank
or banking institution.

On the other hand equity of redemption is simply the right of the defendant mortgagor to
extinguish the mortgage and retain ownership of the property by paying the secured debt within
the 90-day period after the judgment becomes final, in accordance with Rule 68, or even after the
foreclosure sale but prior to its confirmation.
 3. What is meant by the term PACTUM COMMISSORIUM? State the requisites of
PACTUM COMMISSORRIUM? Is PACTUM COMMISSORIUM prohibited? Is
this a valid undertaking? Why?\

PACTUM COMMISSORIUM means is a stipulation whereby the thing used as security shall
automatically become the property of the creditor of non-payment of the principal obligation in
due time.

The requisites for Pactum commisorium that there should be a pledge, mortgage and
antichresis of property; and there is a stipulation for an automatic appropriation by the creditor of
the property in case of nonpayment of principal obligation.

No it not a valid undertaking for the reason Pactum commisorium is forbidden by law and
creditor cannot appropriate the things given by the way of pledge or mortgage or dispose of tem.
Any stipulation to the contrary is null and void. In other word it is prohibited by law for the
reason the amount of laon is ordinarily less than the real value of the thing pledged or mortgage.

4. When is there PACTUM COMMISSORIUM? Provide at least three illustrations.

There is a pactum commissorium when the pledgee may appropriate the thing pledge of after
the first and second auction , the creditors shall be obliged to give an acquaintance for his entire
claim. This act shall be considered as full payment of the claim.

ILLUSTRAITON:

a. An agreement whereby property held in trust was ceded to the trustee upon failure of the
beneficiary to pay the debt to the former as secure by the said property.
b. X as the mortgagee failed to redeem the property in the act of registering the mortgage
property in his name.
c. In situation where there is no redemption effected within the stipulation period the
ownership will pass to the vendee in case of equitable mortgage.

5. What is meant by the indivisibility of the contract of pledge or mortgage?

Indivisibility in a contract of pledge or mortgage is directly and immediately subject the

subject or property upon which it is impose that even though the debt may be divided among the
successors interests of the debtor of the creditor.

6. How is the Contract of Pledge Extinguished?

A Contract of pledge is extinguish If the thing pledged is returned by the pledgee to

the pledgor or owner, the pledge is extinguished under article 2110 of the New Civil Code of
th Philippines. The pledge is also extinguished by payment of the debt, by renunciation or
abandonment of the pledge and by sale of the thing pledged at public auction and other same
causes as all other obligations
 Furthermore if subsequent to the perfection of the pledge, the thing is in
the possession of the pledgor or owner, there is a prima facie presumption that the same
has been returned by the pledgee. This same presumption exists if the thing pledged
is in the possession of a third person who has received it
from the pledgor or owner after the constitution of the pledge.

7. What are the kinds of Contracts of PLEDGE?

Contract of Pledge is Convention or Voluntary Pledge where it is created through the stipulation
of the parties in other words created by contract. Another is Legal Pledge , where the provisions
on the possession , care and sale of the thing pledged govern conventional pledges are applicable
to pledges created by law.

8. What are pledges created by operation of law (LEGAL PLEDGES)?

Articles 546, 612,1731,1914, and 2004 of the Civil Code of the Philippines

9. What is the purpose of pledge and mortgage? What happens to the contract of
pledge when the principal obligation is void in itself?

The main purpose of pledge and mortgage is to secure the fulfillment of the principal
obligations.

In cases the contract of pledge and mortgage when the principal obligation is void itself is
that it will not affect the pledge or mortgage for the reason that it is distinct from the principal
obligation thus it will not affect the validity of the principal obligation.

10. Supposing, it is the contract of pledge that was invalid, what happens to the entire
obligation?

The only defect part of the regarding the pledge will be only the invalid part. The invalidity
of a pledge does not affect the principal contract loan but the invalid pledge can be still use as an
instrument of evidencing indebtedness.

11. What are the requisites of Art. 2107?

The requisites under Article 2107 are the following ;(1) the pledger has reasonable grounds
to fear the destruction or impairment of the thing pledge;(2) No fault on th part of the pledgee;(3)
Pledgor offer another thing which is the same kind and quality of the former; (4)Pledgee does not
choose to exercise his right to cause the thing to be sold at public auction; (5) Pledgee advised
the Pledgor without delay.

12. What is Real Estate Mortgage?

 A contract whereby the debtor secures to the creditor the fulfilment of a principal obligation
specially subjected in such security immovable property to real right over immovable property in
case the principal obligation is not complied with the time stipulated.

13. Distinguish Real Estate Mortgage from Chattel Mortgage.

Chattel Mortgage is made as security for the performance of an obligation which personal
property is recorded in the chattel Mortgage Register while Real Mortgage when a principal
obligation is not complied in the stipulated time the debtor secure to eh creditor the fulfilment of
a principal obligation.

As to the subject matter Real Mortgage is constituted on immovable while Chattel Mortgage
may be constituted only over the personal property sold in instalment sold.

14. What are the kinds of Mortgage?

The Kind of Real Mortgage are Voluntary, Legal, and Equitable Mortgage. Where Voluntary
is when agreed upon the parties or constituted by the will of the owner of the property on which t
is created. Legal Mortgage is made under the terms under the operation of law in favour a certain
person. Equitable Mortgage where it lacks the formalities of a mortgage, shows the intention of
the parties to make the property a security for a debt.

15. What are the essential requisites of a contract of real estate mortgage?

In article 2085 of the New Civil Code of the Philippines the following provided. (1) That
they be constituted to secure the fulfilment of a principal ; (2) That the pledge or the mortgagor
be the absolute owner of the thing pledge; (3) That the persons constituting the pledge or
mortgage have free disposal of their property, and in the absence thereof, that they be legally
authorized for the purpose.

16. What are the effects of registration or recording with the appropriate Registry of
Property?

The registration of a mortgage over real property is without prejudice to the better right of
third parties. The Creditor may recover the loan and has the right to compel the debtor to execute
a contract of mortgage in a public instrument

17. State the Characteristics of Real Estate Mortgage. Explain thoroughly. GNEMENT

The Characteristic of a Real Estate Mortgage is that it is an Accessory contract which means
it cannot stand on its own where there is a need of a principal contract. It is also Unilateral,
where it creates only an obligation on the part of the creditor who must free the property
fulfilled. It is also Indivisible and Inseparable subsidiary and also Real
 18. What is meant by the term DRAGNET CLAUSE? Provide at least three
illustrations?

Dragnet clause is a clause in a mortgage deed stating that a mortgage secures all the debts
that the mortgagor may at any time owe to the mortgagee. That is one which is specifically
phrased to subsume all debts of past and future origins. Mortgage of this character enable the
parties to provide continuous dealings, the nature and extent of which may not be known or
anticipated at the time, and they avoid the expense and inconveniences of executing a new
security on each transaction.

ILLUSTRATION:

a. When in the stipulation it states in the clause “This security agreement that you are
providing this financial institution is to secure this loan and any other amounts you now
owe or will owe this financial institution.”

b. California courts examine a number of factors in determining whether a broadly worded

dragnet clause was mutually intended by the parties to cover preexisting or
contemporaneous debts. Some of the relevant factors articulated in the case law include:
(1) the language and specificity of the dragnet clause; (2) whether the parties were aware
of the dragnet clause and appreciated its significance; (3) whether the other loans were of
the same type or character as the primary loan; and (4) whether the bank relied upon the
dragnet clause as the security for the other loans.[Fischer v. First Internat. Bank, 109 Cal.
App. 4th 1433 (Cal. App. 4th Dist. 2003)]

c. A dragnet clause in a mortgage purports to use the real estate as security for all debts
past, present and future, between the parties to a security agreement. The clause can help
facilitate commercial transactions which involve ongoing advancements of funds. A
literal interpretation of a dragnet clause permits the bank to turn to the real estate that is
secured by the mortgage when a mortgagor is late in paying a personal loan, misses a
payment on an automobile loan, or overdraws her checking account at the bank. In
Florida, dragnet clauses are strictly construed against the drafter of the
instrument.[United Nat'l Bank v. Tellam, 644 So. 2d 97 (Fla. Dist. Ct. App. 3d Dist.
1994)]

d. In the operation of its business, EII obtained a loan from a bank (PBP) secured by a real
estate mortgage of its six properties in Marikina covered by TCT Nos. N-68661 to N-
68666. The real estate mortgage provides that said lands are transferred and conveyed by
way of mortgage to secure the payment of “certain loans, overdrafts and/or other credit
accommodations all of which is hereby fixed at P500,000 as well as those that the
mortgagee may hereafter extend to the mortgagor including interests and expenses or any
other obligation owing to the mortgagee”

19. What is meant by the term PACTO DE NON ALIENADO? Provide at least three
illustrations?
 PACTO DE NON ALIENADO (Non-alienation pact) is a right to foreclose and the right to
seize and sell the mortgaged property, regardless of any subsequent alienation given to the
mortgagee through process directed solely against the mortgagor.

ILLUSTRATION

a. When X as the mortgagors hereby agree in solido not to sell, alienate, deteriorate, or
encumber said mortgaged property to the prejudice of this mortgage are made with the
contract of loan
b. That the "mortgagor shall not sell, dispose of, mortgage, nor in any manner encumber the
mortgaged property, without the written consent of the Mortgagee
c. That X stipulated with Y the mortgagor that the 500 square meter part of the mortgage
property should not be alienate or dispose in any manner.

20. What is meant by the term FORECLOSURE? What are the kinds of
FORECLOSURE? Explain each.

Foreclosure is a remedy available to the mortgagee by which he subjects the mortgage

property to satisfaction of the obligations to secure that for which the mortgage was given.

The Kind of foreclosure are Judicial Foreclosure where ordinary action under the rule 68 of
the rules of court and Extrajudicial Foreclosure is when mortgage is given a special power of
attorney to sell the mortgage property by public auction

21. What are the types of forced sales arising from failure to a mortgage debt,
recognized under our jurisdiction?

In the case of (Spouses Concepcion vs. CA. G.R. No. 122079. June 27, 1997).The three
common types of forced sales arising from a failure to pay a mortgage debt include (a) an
extrajudicial foreclosure sale, governed by Act No. 3135; (b) a judicial foreclosure sale,
regulated by Rule 68 of the Rules of Court; and (c) an ordinary execution sale, covered by Rule
39 of the Rules of Court. Each mode, peculiarly, has its own requirements

22. What is meant by redemption? State the valid requisites for redemption?

Redemption is the transaction by which the mortgagor reacquires or buys ack the property
which may have passed under the mortgage or divests the property of the lien which the
mortgage may have created.

The following are valid Requisites for redemption; (1) it must be made within 12 month from
the date of the registration of the sale in the Office of Registry of Property;(2) Payment of the
Purchase price of the Property involved;(3) Writ of notice of redemption must be served on the
officer who made the sale and a duplicate for the registry of property; (4) Tender of payment
within the prescribe period to make the redemption valid or preserve the right for future
enforcement.
 23. What is the RIGHT OF REDEMPTION? Distinguish from EQUITY of
REDEMPTION. Take emphasis on the important periods and dates.

The right of redemption in relation to a mortgage - understood in the sense of a prerogative to

re-acquire mortgaged property after registration of the foreclosure sale - exists only in the case of
the extrajudicial foreclosure of the mortgage. No such right is recognized in
a judicial foreclosure except only where the mortgagee is the Philippine National Bank or a bank
or banking institution, where a mortgage is foreclosed extrajudicially, Act 3135 grants to the
mortgagor the right of redemption within one (1) year from the registration of the sheriffs
certificate of foreclosure sale.

On the other hand equity of redemption is simply the right of the defendant mortgagor to
extinguish the mortgage and retain ownership of the property by paying the secured debt within
the 90-day period after the judgment becomes final, in accordance with Rule 68, or even after the
foreclosure sale but prior to its confirmation.

24. What is the so called alternative actions/remedy available to the Mortgagee?

An alternative actions/remedy available to the mortgagee One, is the Right to sue on the personal
covenant Mortgagors promise to repay the debt Mortgagee can pursue mortgagors after exercising the
power of sale for anything which remains H/W if foreclosure is used they cannot pursue the mortgagor.
The mortgagee may file a collection suit against the mortgagor, where this will open up all the
properties of the mortgagor to attachment and execution, even the mortgaged property itself.

Another is that the mortgagee may opt to foreclose on the mortgaged property In case the
debt is not fully satisfied, he may sue the mortgagor for deficiency judgment (not a collection
case for the whole indebtedness), in which case, all the properties of the mortgagor, other than
the mortgaged property, are again opened up for the satisfaction of the deficiency.

Some other remedies that the mortgagee can undertake are Consider Forbearance or a
Repayment Plan, Reduce Your Interest Rate, Extend Your Loan Term or just Sell Your Home

25. What is meant by JUDGMENT OF FOECLOSURE? What is meant by

DEFICENCY JUDGMENT?

A final judgment of foreclosure is an order from the court which allows them to sell a
defendant's home for failure to pay the mortgage. It is one of the last dominoes to fall before the
foreclosure sale, and a big loss for a homeowner who wants to keep their home.
 Deficiency judgment is a judgment by a court against a debtor indicating that the sale on a
foreclosed piece of property did not cover the outstanding mortgage in full. It is a lien placed on
the debtor for further money. A deficiency judgment is not considered by the court unless the
lender makes a motion for it to be granted

26. What is the remedy to be undertaken by the mortgagee, if the proceeds of the sale of
the mortgaged property are not sufficient to cover the amount due?

If the proceeds of the auction sale of the property are not sufficient, the trial court, upon
motion, shall render a deficiency judgment against the defendant (Sec. 6, Rule 68). Equity of
redemption is the right of the mortgagor to redeem the mortgaged property after his default in the
performance of the conditions of the mortgage but before the sale of the property or the
confirmation of the sale after judicial foreclosure thereof (International Services, Inc. v. IAC,
142 SCRA 467 [1986]).

This is the right of the defendant mortgagor to extinguish the mortgage and retain ownership
of the property by paying the secured debt within a 90-day period after the judgment becomes
final or after the foreclosure sale but prior to its confirmation (GSIS v. CFI, 175 SCRA 19
[1989]).Some other remedies that the mortgagee can undertake are Consider Forbearance or a
Repayment Plan, Reduce Your Interest Rate, Extend Your Loan Term or just Sell Your Home

27. What is a contract of Chattel Mortgage? What is the affidavit of good faith in
chattel mortgage?What is the consequence of absence of the affidavit of good faith
in a chattel mortgage?

Chattel Mortgage is contract by virtue of which personal property is recorded in the chattel
Mortgage Register as security for the performance of an obligation.

Affidavit of good faith in chattel mortgage is an oath in a contract pf chattel mortgage

wherein the parties “severally swear that the mortgage is made for the purpose of securing the
obligation specified in the conditions thereof and for the valid obligations and one not entered
into for the purpose of fraud”

In the absence of such affidavit is not necessary to the validity of such mortgage it only
necessary to change the mortgage as a Preferred Mortgage. That in a case of the absence of
affidavit vitiates the mortgage only as against third person without notice, like creditors and
subsequent encumbrance.

28. What are the characteristics of a chattel mortgage?

The characteristic of chattel mortgage are the following; Accessory contract for its purpose
of securing the performance of a principal obligations; Formal contract registration of Chattel
Mortgage Register is indispensable for its validity; and Unilateral contract for obligation only
arise on the part of the creditor.