> 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
a. There should be a pledge, mortgage, antichresis of property by way of security for the payment of the
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.