PLEDGE

(ARTICLES 2085-2123)

PROVISIONS COMMON TO PLEDGE

AND MORTGAGE
Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure 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 their
property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or
mortgaging their own property. (1857)

Art. 2086. The provisions of Article 2052 are applicable to a pledge or mortgage. (n)

Art. 2087. It is also of the essence of these contracts that when the principal obligation becomes
due, the things in which the pledge or mortgage consists may be alienated for the payment to the
creditor. (1858)

PLEDGE
> Contract by virtue of which the debtor delivers to the creditor or to a third person a
movable, or 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

KINDS OF PLEDGE
1. Voluntary or conventional
2. Legal

REQUISITES TO A CONTRACT OF
PLEDGE
1. It be constituted to secure the fulfillment of a principal obligation
2. The pledgor be the absolute owner of the thing pledged
3. That the persons constituting the pledge have the free disposal of the property and in
the absence thereof, that they be legally authorized for the purpose
4. The pledge is perfected by the delivery of the thing pledged
5. When the principal obligation becomes due, the things, which the pledge consists, may
be alienated for the payment of the creditor.

CHARACTERISTICS OF A
CONTRACT OF PLEDGE
1. Real contractperfected by the delivery of the things pledged by the debtor who is
called the pledgor to the creditor who is called by the pledgee, or to a third person by common
agreement
2. Accessory contract
3. Unilateral contract
4. Subsidiary contract

WHAT IS THE CAUSE OR

CONSIDERATION IN PLEDGE?
> Pledge is an accessory contract
> Its cause is the principal obligation

CONSTITUTED TO SECURE THE FULFILLMENT OF THE PRINCIPAL OBLIGATION

CONSTITUTED BY THE ABSOLUTE
OWNER
1. Future property cannot be the subject of a pledge or mortgage
2. A pledge or mortgage executed by one who is not the owner of the property pledged or
mortgaged is without legal existence and registration cannot validate it
3. Share in a co-ownershipshall be limited to the portion which may be alienated by him
in the division upon the termination of the co-ownership

What is the absolute owner? It means unencumbered property. The absolute

owner has legal and beneficial ownership. In the earlier example, P is the legal owner and S
is the beneficial owner. This being the case, neither of them can pledge the property.

WHAT IS THE DIFFERENCE

BETWEEN FREE DISPOSAL AND
CAPACITY TO DISPOSE?
> FREE DISPOSAL OF THE PROPERTYproperty must not be subject to any claim of a third
person
> CAPACITY TO DISPOSEpledgor or mortgagor has the capacity or authority to make a
disposition of the property

THING PLEDGED OR MORTGAGED

MAY BE ALIENATED
> Necessarily implied as an inherent element of the transaction of the mortgage or
pledge
> The only remedy for the pledgee is to have the security given sold at public auction and
the proceeds of the sale be applied to the payment of the obligation secured by the mortgage
or pledge
PLEDGOR OR MORTGAGOR MAY BE
A THIRD PERSON
1. Accommodation pledge or mortgage
2. Duty of mortgagee to make proper inquiry
3. Where mortgage is gratuitoussame should be strictly construed
4. Liability for deficiencypledgor not liable for any deficiency should the property be not sufficient
to cover the debt