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 contract—perfected 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-ownership—shall 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 PROPERTY—property must not be subject to any claim of a third person
> CAPACITY TO DISPOSE—pledgor 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 gratuitous—same should be strictly construed
4. Liability for deficiency—pledgor not liable for any deficiency should the property be not sufficient to cover the debt
