PACTUM COMMISSORIUM

> Automatic  appropriation  by  the  creditor  of  the  thing pledged or mortgaged upon the failure of the debtor to pay the principal obligation

> TEST  IF  THERE  IS  EXISTS  PACTUM  COMMISSORIUM  is whether or not there is no need for extra step to be taken by creditor

PROHIBITION AGAINST PACTUM COMMISSORIUM

1.   Stipulation  is  null  and  void—it  is  said  to  be  contrary  to good morals and public policy

2.   Requisites
a.    There should be a pledge, mortgage, antichresis of property by way of security for the payment of the
principal obligation
b.   Stipulation  for  the  automatic  appropriation  of  the property in favor of the creditor upon default of the debtor/pledgor

3.   Effect on the security contract—doesn’t affect substantially the  principal  contract  of  pledge,  mortgage  or  antichresis with regard to its validity and efficacy

AGREEMENTS THAT WOULD NOT CONSTITUTE PACTUM COMMISSORIUM

1.   Attorney in fact
2.   Option contract.  There would be another contract.  There is a risk of the courts to look at it as a PC.
3.   Dacion en pago
4.   Assigned shares.  Creditor would only have legal title and pledgor would still have beneficial ownership.